Circular No. 129/2008/TT-BTC guides the implementation of certain provisions of the Value Added Tax Law and provides guidance on implementing Decree No. 123/2008/NĐ-CP dated December 8, 2008, of the Government detailing and guiding the implementation of certain provisions of the Value Added Tax Law.

CIRCULAR

Guidelines for implementing certain provisions of the Value Added Tax Law and guidelines for implementing Decree No. 123/2008/NĐ-CP dated December 8, 2008 of the Government detailing and guiding the implementation of certain provisions of the Value Added Tax Law.

________________________

Pursuant to the Law on Value Added Tax No. 13/2008/QH12 dated June 3, 2008;

Pursuant to the Law on Tax Administration No. 78/2006/QH11 dated November 29, 2006;

Pursuant to Decree No. 123/2008/NĐ-CP dated December 8, 2008 of the Government detailing and guiding the implementation of certain provisions of the Law on Value Added Tax;

is a medicine production facility certified by the competent authority of a country participating in the EMA or ICH or PIC/s to meet EU-GMP or PIC/s-GMP standards or equivalent, and announced by the Ministry of Health (Drug Administration Department) on the Drug Administration Department's electronic information website.

The Ministry of Finance issues guidelines on value added tax as follows:

A. SCOPE OF APPLICATION

I. TAXABLE OBJECTS AND TAXPAYERS

1. Taxable Objects

The taxable objects subject to value added tax (VAT) include goods and services used for production, business operations, and consumption in Vietnam (including goods and services purchased from organizations and individuals abroad), except for those exempted from VAT as specified in Section II, Part A of this Circular.

2. Taxpayers

VAT taxpayers are organizations and individuals engaged in producing and trading goods and services subject to VAT in Vietnam, regardless of industry, form, or type of business entity (hereinafter referred to as business entities) and organizations and individuals importing goods and purchasing services from abroad that are subject to VAT (hereinafter referred to as importers), including:

2.1. Business entities established and registered for business under the Enterprise Law, State Enterprise Law (now the Enterprise Law), and Cooperative Law;

2.2. Economic organizations of political organizations, political-social organizations, social organizations, social-professional organizations, people's armed forces units, public service organizations, and other organizations;

2.3. Foreign-invested enterprises and foreign parties participating in joint ventures under the Law on Investment (now the Investment Law); foreign organizations and individuals conducting business activities in Vietnam without establishing a legal entity in Vietnam;

2.4. Individuals, households, independent traders, and other entities engaged in production and business activities, including imports;

2.5. Organizations and individuals engaged in production and business activities in Vietnam purchasing services (including cases where services are attached to goods) from organizations abroad without a permanent establishment in Vietnam, and individuals abroad who are non-residents in Vietnam.

II. NON-TAXABLE OBJECTS

1. Agricultural products (including plantation products), livestock, aquaculture, marine products, and fisheries products not yet processed into other products or only through simple processing by organizations and individuals self-produced and sold, and at the import stage.

Products newly subjected to simple processing are products that have been cleaned, dried, peeled, shelled, sliced, salted, frozen, and other common preservation methods.

Example 1: drying, sun-drying, peeling, shelling, slicing agricultural products; cleaning, drying, salting, icing aquatic products and other fisheries products.

2. Seed products for livestock and plants, including breeding eggs, seedlings, plant seeds, semen, embryos, genetic materials, at the stages of cultivation, importation, and commercial trade. Seed products for livestock and plants that are exempt from VAT must be produced by organizations with import and commercial trade licenses for seed products issued by state management agencies. For seed products for livestock and plants that are subject to national standards and quality requirements, they must meet the conditions stipulated by the state.

3. Irrigation, drainage; plowing, harrowing land; dredging canals, ditches within fields serving agricultural production; harvesting agricultural products services.

4. Salt products produced from seawater, natural rock salt, refined salt, iodized salt, whose main component has the chemical formula NaCl.

5. Housing owned by the state sold by the state to tenants.

6. Transfer of land use rights.

7. Life insurance, including health insurance, personal accident insurance within life insurance packages; student insurance, and other human insurance services such as seafarer and crew member accident insurance, personal accident insurance (including combined accident and life insurance, hospitalization insurance), passenger accident insurance, tourist accident insurance, driver and passenger accident insurance, insurance for heirs, surgical hospitalization assistance insurance, individual life insurance, electricity user insurance, and other related insurances; pet insurance, crop insurance, and other agricultural insurance services; reinsurance.

8. Financial services:

a) Credit services including forms such as loans; discounting and rediscounting transferable instruments and other negotiable securities; guarantees; financial leasing and other credit services provided by financial and credit institutions in Vietnam according to the laws.

b) Securities trading including: brokerage, proprietary trading, underwriting, investment advisory, custody, fund management, portfolio management, market organization services of stock exchanges or trading centers, and other activities regulated by securities laws.

Market organization services of stock exchanges or trading centers include: approval of listing, listing management, transaction management, transaction member management, provision of information related to listing management, transaction management, and other related services.

c) Capital transfers including partial or full transfers of invested capital, including selling businesses to other businesses for production and business operations, securities transfers, and other capital transfer forms regulated by law.

d) Derivative financial services including interest rate swaps, forward contracts, futures contracts, options to buy or sell foreign currencies, and other derivative financial services regulated by law.

9. Medical services and veterinary services, including medical examination, treatment, prevention services for humans and animals, family planning services, health rehabilitation services for patients. Medical services also include patient transportation, rental of hospital rooms and beds from healthcare facilities; testing, imaging, blood and blood products used for patients.

10. Postal and public telecommunications services and universal internet access programs as per the government's program; postal and telecommunications services from abroad to Vietnam (incoming direction).

11. Public services related to sanitation, street drainage, and residential areas; maintenance of zoos, gardens, parks, street trees, public lighting; funeral services. The services mentioned herein are not distinguished by funding sources. Specifically:

a) Public sanitation services including street and residential area drainage and waste collection, disposal, and treatment activities; sewage discharge and wastewater treatment. In cases where businesses provide sanitation and drainage services to organizations and individuals such as office cleaning and sanitation, these services are subject to VAT.

b) Maintenance of zoos, flower gardens, parks, and street greenery including management, planting, care, and protection of birds and animals in parks, zoos, public areas, and national parks.

c) Public lighting includes street lighting, alley and village lighting in residential areas, flower gardens, and parks.

d) Funeral services provided by establishments with the function of providing funeral services include renting funeral houses, cars for funeral services, burial, cremation, and reburial.

12. Repair, construction, and renovation using people's contributions and humanitarian aid funds for cultural and artistic works, public service facilities, infrastructure, and housing for social policy beneficiaries.

Where other sources of funding besides people's contributions (including contributions and sponsorships from organizations and individuals) and humanitarian aid funds are utilized, but do not exceed 50% of the total funding for the project, the entire value of the project is exempt from tax.

Social policy beneficiaries include persons with meritorious service as defined by laws on persons with meritorious service; social welfare recipients receiving subsidies from the state budget; members of poor and near-poor households, and other cases as prescribed by law.

13. Teaching and vocational training as prescribed by law, including foreign language and computer instruction; dance, singing, painting, music, drama, circus, physical education, and sports instruction; child-rearing and other vocational training aimed at enhancing cultural literacy and professional knowledge.

Where educational institutions from kindergarten to secondary school level charge for meals, the meal charges are also exempt from tax.

14. Broadcasting radio and television using state budget funds.

15. Publishing, importing, and distributing newspapers, magazines, specialized newsletters, political books, textbooks, teaching materials, legal texts, scientific and technical books, books printed in ethnic minority scripts, and propaganda posters, including those in audio or video formats or electronic data forms; printing money.

Newspapers, magazines, and specialized newsletters include the activity of transmitting pages of newspapers, magazines, and specialized newsletters.

Political books are publications promoting the political guidelines of the Party and State serving specific political tasks, commemorations, and traditional days of organizations, levels, sectors, and localities; statistical books and publications promoting good deeds; books containing speeches and theoretical research by Party and State leaders.

Textbooks (including those in audio or video formats or electronic data forms) are instructional materials used for teaching and learning from kindergarten through secondary school (including reference materials suitable for teachers and students according to the educational curriculum).

Coursebooks are books used for teaching and learning in universities, colleges, vocational high schools, and vocational training institutions.

Legal texts are books containing legal normative documents of the State.

Scientific and technical books are publications introducing and guiding scientific and technical knowledge directly related to production and various scientific and technical fields.

Books printed in ethnic minority scripts include bilingual books in both common script and ethnic minority script.

Propaganda and mobilization posters are paintings, photographs, posters, leaflets, and brochures serving the purpose of propaganda and mobilization, slogans, portraits of leaders, flags of the Party, State, Youth League, and Young Pioneers.

Audio tapes, discs, or recorded content of newspapers, magazines, specialized newsletters, and books mentioned herein.

16. Public passenger transportation by bus and tram within the province, urban areas, and nearby provincial routes as stipulated by the Ministry of Transport.

17. Goods that cannot be produced domestically and are imported in the following cases:

a) Machinery, equipment, and materials imported for direct use in scientific research and technological development activities;

b) Machinery, equipment, spare parts, specialized transportation means, and materials required to be imported for conducting exploration, exploitation activities of oil and gas fields;

c) Aircraft (including aircraft engines), drilling platforms, and watercraft imported to form fixed assets of enterprises, leased from abroad for use in production and business operations and for leasing.

To determine goods falling under the category of VAT-exempt imports as provided herein, importers must present to customs authorities documents as guided by the Ministry of Finance regarding customs procedures; customs inspection and supervision; export duties, import duties, and tax administration for exported and imported goods.

The list of machinery, equipment, and supplies domestically produced to distinguish from those not yet domestically produced for direct use in scientific research and technological development; the list of machinery, equipment, spare parts, specialized transport vehicles, and supplies domestically produced to distinguish from those not yet domestically produced for use in exploration, development of oil and gas fields; the list of aircraft, drilling platforms, and watercraft domestically produced to distinguish from those not yet domestically produced for use as fixed assets of enterprises, leased from abroad for production and business operations and for leasing, issued by the Ministry of Planning and Investment.

18. Specialized weapons and equipment serving national defense and security.

a) Specialized weapons and equipment for defense and security as specified in this point according to the List of Specialized Weapons and Equipment for Defense and Security unified by the Ministry of Finance with the Ministry of National Defense and the Ministry of Public Security.

Weapons and equipment exempt from VAT as specified in this point must be complete and integrated products or components, spare parts, and packaging specifically used for assembly and product preservation. In cases where specialized weapons and equipment for defense and security require repair, repair services performed by enterprises under the Ministry of National Defense and the Ministry of Public Security are exempt from VAT.

b) Specialized weapons and equipment (including materials, machinery, equipment, and spare parts) for defense and security imported under exemptions from import duties as prescribed by the Law on Export Duties and Import Duties or imported annually within quotas approved by the Prime Minister are exempt from VAT.

Documents and procedures for weapons and equipment not subject to VAT at the import stage as guided by the Ministry of Finance regarding customs procedures; customs inspection and supervision; export duties, import duties, and tax administration for exported and imported goods.

19. Imported goods and goods, services sold to organizations and individuals for humanitarian aid and non-reimbursable assistance in the following cases:

a) Imported goods in cases of humanitarian aid and non-reimbursable assistance and must be confirmed by the Ministry of Finance;

b) Gifts given to state agencies, political organizations, political-social organizations, occupational-political-social organizations, social organizations, occupational-social organizations, and people's armed units in accordance with laws on gifts and presents.

c) Gifts and presents given to individuals in Vietnam in accordance with the laws on gifts and presents;

d) Items of equipment of foreign organizations and individuals according to the diplomatic immunity standards prescribed by the law on diplomatic immunity; items of equipment of Vietnamese citizens residing abroad when returning to Vietnam.

đ) Goods carried by individuals within the tax-free baggage allowance;

The amount of imported goods subject to exemption from VAT at the import stage shall be based on the tax-free import quota specified in the Law on Export Tax and Import Tax and related implementing documents.

Imported goods of organizations and individuals subject to diplomatic immunity under the Ordinance on Diplomatic Immunity are exempt from Value Added Tax (VAT). In cases where diplomatic immunity subjects purchase goods and services in Vietnam subject to VAT, they will be refunded VAT according to the guidance provided in Point 7, Part C of this Circular. The subjects, goods, and procedures for enjoying the exemption from VAT are implemented according to the Ministry of Finance's guidelines on VAT refund procedures for diplomatic missions, consular offices, and international organization representative offices in Vietnam.

The documents and procedures for processing imported goods exempt from VAT at the import stage shall be carried out in accordance with the Ministry of Finance's guidelines on customs procedures; customs inspection and supervision; export tax, import tax, and tax management for exported and imported goods.

e) Goods and services sold to foreign organizations and international organizations for humanitarian aid and non-reimbursable assistance to Vietnam.

Procedures for international organizations and foreigners purchasing goods and services in Vietnam for humanitarian aid and non-reimbursable assistance to Vietnam, which are exempt from VAT: International organizations and foreigners must submit a written document to the seller, clearly stating the name of the international organization or foreigner purchasing goods and services for humanitarian aid and non-reimbursable assistance to Vietnam, the quantity or value of the purchased goods; and confirmation from the Ministry of Finance regarding this aid.

When selling goods, businesses must issue invoices in accordance with the guidance provided in Section IV, Part B of this Circular, indicating that the goods are sold to foreign organizations and individuals, international organizations for non-reimbursable assistance and humanitarian aid, exempt from VAT, and retain the document from the international organization or the Vietnamese representative office as the basis for tax declaration.

20. Goods in transit through Vietnam’s territory; temporarily imported goods for re-export; temporarily exported goods for re-import; imported raw materials for producing and processing exported goods under production and processing export contracts signed with foreign parties.

Goods and services traded between foreign countries and free zones, and among free zones themselves.

Duty-free zones include: export processing zones, export processing enterprises, bonded warehouses, bonded areas, outer warehouses, special economic trade zones, industrial-commercial zones, and other economic zones established and enjoying tax benefits as duty-free zones pursuant to the Prime Minister’s Decision. The trading relationship between these zones and the outside is considered as export and import relations.

Documents and procedures for determining and handling the exemption from VAT in these cases shall be carried out in accordance with the Ministry of Finance's guidelines on customs procedures; customs inspection and supervision; export tax, import tax, and tax management for exported and imported goods.

21. Technology transfer as stipulated by the Law on Technology Transfer; transfer of intellectual property rights as stipulated by the Law on Intellectual Property. In cases where technology transfer contracts or intellectual property rights transfer contracts include the transfer of machinery and equipment, the VAT-exempted object is calculated based on the value of the transferred technology and intellectual property rights; if it is not possible to separate them, VAT is calculated based on the total value of the transferred technology, intellectual property rights, and machinery and equipment.

Computer software includes software products and software services as prescribed by law.

22. Gold imported in bar, ingot form, and various types of gold that have not been crafted into jewelry, decorative items, or other products.

Gold in bar, ingot form, and various types of unprocessed gold shall be determined according to the regulations on gold management and trading.

23. Unprocessed natural resources and minerals that are exported as raw materials.

Unprocessed natural resources and minerals refer to natural resources and minerals that have not been processed into other products, including minerals that have undergone screening, concentration, or enhanced content processing, or resources that have undergone cutting or splitting processes.

24. Artificial products used to replace body parts of patients, including products implanted permanently in the human body; crutches, wheelchairs, and other specialized tools used by disabled persons.

25. Goods and services of individual traders whose average monthly income is lower than the minimum wage applicable to domestic organizations and enterprises as stipulated by the Government's regulations on regional minimum wages for workers employed by companies, enterprises, cooperatives, joint ventures, farms, households, individuals, and other organizations in Vietnam that hire labor.

26. The following goods and services:

a) Goods sold duty-free at duty-free shops as prescribed by the Prime Minister.

b) National reserve goods sold by national reserve agencies.

c) Activities involving fees and charges collected by the State as prescribed by laws on fees and charges.

d) Demining and explosive ordnance disposal activities conducted by defense units for projects funded by state budget funds.

Goods exempt from VAT at the import stage according to the provisions, if their purpose changes, must be declared and paid VAT at the import stage according to the regulations with the customs authority where the customs declaration was registered. The time for calculating VAT starts from the date of change in purpose. Organizations and individuals selling such goods to the domestic market must declare and pay VAT to the directly managing tax authority according to the regulations.

B. BASIS AND METHODS OF CALCULATING TAXES

The basis for calculating VAT is the taxable value and the tax rate.

I. DETERMINATION OF TAXABLE VALUE

1. The taxable value of goods and services is determined specifically as follows:

1.1. For goods and services sold by production and business establishments, the taxable value is the selling price excluding VAT. For goods and services subject to special consumption tax, the taxable value is the selling price including special consumption tax but excluding VAT.

The taxable value of various types of goods and services includes additional surcharges and fees collected beyond the price of goods and services that the business enjoys, except for surcharges and fees that the business must pay to the State Budget. If the business applies a discount or trade discount for customers (if any), the taxable value of VAT is the reduced selling price or the selling price after applying the trade discount for customers.

1.2. For imported goods, the taxable value is the import price at the border plus (+) import duties (if any), plus (+) special consumption tax (if any). The import price at the border is determined according to the regulations on the taxable value of imported goods.

In the case of imported goods exempted or reduced from import tax, the taxable VAT value is the import price plus (if applicable) import tax calculated at the rate that would be payable after exemption or reduction.

1.3. For goods and services used for exchange, internal consumption, gifts, rewards, or as substitute wages for employees, the taxable value of VAT is the price of similar or equivalent goods and services at the time these activities occur.

Goods and services for internal consumption are those produced or supplied by a business establishment for its own consumption, excluding goods and services used for continuing the production and business process of the establishment.

Internal inventory transfers such as transferring goods to internal warehouses, transferring raw materials, semi-finished products for continued production within a single production and business entity are not subject to VAT calculation and payment.

Example 2: Unit A produces electric fans, using 50 fan products for installation in production workshops, the selling price (excluding VAT) of this type of fan is 1 million VND/unit. The VAT output tax payable on the number of fans used internally is:

1 million VND/unit x 50 units x 10% = 5 million VND.

Example 3: Textile manufacturing facility B has a yarn workshop and a sewing workshop. Facility B transfers finished yarn from the yarn workshop to the sewing workshop for continued production processes, then facility B does not need to calculate and pay VAT on the yarn transferred to the sewing workshop.

Example 4: Production facility C engages in both animal feed production and direct livestock farming activities. Part of the animal feed produced is sold and subject to VAT, while another part is used for ongoing livestock farming activities that are not subject to VAT. Facility C does not need to calculate and pay VAT on the animal feed used for non-VAT taxable livestock farming activities. The input VAT related to the production of animal feed can be allocated according to the ratio of sales revenue from animal feed to the total sales revenue from animal feed and livestock sales.

1.4. For leasing activities such as renting houses, offices, factories, warehouses, docks, parking lots, transportation means, machinery, and equipment, the amount for calculating VAT is the rental fee excluding VAT.

In cases where rent is paid periodically or prepaid for a lease term, the amount for calculating VAT is the periodic rental fee or prepaid rental fee for the lease term excluding VAT.

In cases where machinery and equipment, means of transport are leased from abroad, which are not yet produced domestically, and then subleased, the taxable value can be reduced by the rental payment made to the foreign party.

The rental price agreed upon by both parties is determined according to the contract. Where the law specifies a range for rental prices, the rental price must be within the specified range.

1.5. For goods sold on installment or deferred payment terms, the amount for calculating VAT is the selling price excluding VAT, which does not include the interest on installment or deferred payments.

Example 5: A motorcycle trading company sells Honda motorcycles with a 100cc engine, the installment selling price excluding VAT is 25.5 million VND/unit (including a selling price of 25 million VND and installment interest of 0.5 million VND), then the VAT taxable amount is 25 million VND.

1.6. For processing services, the amount for calculating VAT is the processing fee under the processing contract excluding VAT, including labor costs, fuel, power, auxiliary materials, and other expenses serving the processing of goods.

1.7. For construction and installation activities, the amount for calculating VAT is the value of the project, project component, or portion of work handed over excluding VAT.

1.7.1. In cases where construction and installation contracts include the cost of raw materials, the amount for calculating VAT includes the construction and installation cost plus the value of raw materials excluding VAT.

Example 6: Construction Company B undertakes a construction project including the cost of raw materials, the total settlement amount excluding VAT is 1.5 billion VND, of which the value of construction materials excluding VAT is 1 billion VND, then the VAT taxable amount is 1.5 billion VND.

1.7.2. In cases where construction and installation contracts do not include the cost of raw materials, the amount for calculating VAT is the construction and installation cost excluding the value of raw materials, excluding VAT.

Example 7: Construction Company B undertakes a construction project without including the cost of construction materials, the total project value excluding VAT is 1.5 billion VND, the value of raw materials provided by the investor A excluding VAT is 1 billion VND, then the VAT taxable amount in this case is 400 million VND (1.5 billion VND - 1 billion VND).

1.7.3. In cases where construction and installation projects are settled based on project components or completed construction volumes, the amount for calculating VAT is based on the value of project components or completed construction volumes excluding VAT.

Example 8: Weaving Company X (referred to as Party A) hires Construction Company Y (referred to as Party B) to undertake the expansion of a production workshop.

- Construction and installation value: 80 billion VND.

- Value of equipment supplied and installed by Party B: 120 billion VND.

- VAT at 10%: (80 billion + 120 billion) x 10% = 20 billion VND.

VAT at 10%: (80 + 120) x 10% = 20 billion VND.

- Party A:

+ Accepts delivery of factory buildings, records an increase in fixed assets for depreciation calculation at 200 billion VND (value excluding VAT).

+ VAT of 20 billion VND is declared and deducted from the output VAT of goods sold or claimed for refund according to regulations.

In cases where Party A accepts and pays Party B for each project component (assuming the construction and installation value of 80 billion VND is accepted, delivered, and paid first), the taxable VAT value is 80 billion VND.

If Party A accepts and pays Party B according to project components (assuming the construction and installation value of 80 billion VND is accepted and paid first), then the amount for calculating VAT is 80 billion VND.

1.8. For real estate business activities, the amount for calculating VAT is the transfer price of real estate minus (-) the actual land price (or land lease price) at the time of transfer. If the declared land price at the time of transfer by the taxpayer is insufficient to determine a reasonable taxable amount according to the law, it will be deducted based on the land price (or land lease price) set by the People's Committee of provinces and centrally-administered cities at the time of real estate transfer. The maximum deductible land price shall not exceed the amount of land received from customers.

In cases of infrastructure development, house construction for sale, or transfer with payments made according to project progress or payment schedule stipulated in the contract, the deductible land price (-) is the actual land price at the time of the first payment according to the progress. The deductible land price is calculated as a percentage (%) of the payment made according to the project progress or payment schedule stipulated in the contract relative to the actual land price at the time of transfer (the time of the first payment according to the progress).

Example 9: Real Estate Investment and Development Company A was assigned 10,000 square meters of land by the State to build houses for sale. The company sold a house with a land area of 100 square meters, the selling price of the house and the transfer of land use rights excluding VAT is 2 billion VND (including 1.2 billion VND for the house and infrastructure, and 8 million VND/m2 declared by the company for the transfer of land use rights).

The direct tax authority determines that the declared price by the company is insufficient to determine a reasonable taxable amount according to the law.

At the time of transfer, the land price set by the People's Committee is 6 million VND/m2, then the VAT taxable amount for the above house is:

2 billion VND - (6 million VND x 100 square meters) = 1.4 billion VND.

The VAT output tax is: 1.4 billion VND x 10% = 140 million VND.

Example 10: Real Estate Trading Company C sells a villa, the transfer contract price is 8 billion VND, including a house price of 5 billion VND and a land price of 3 billion VND. Company C collects money according to the project progress. The buyer must make three payments, the first payment is 30% of the contract (2.4 billion VND), the second payment is 50% of the contract (4 billion VND), and the third payment is the remaining balance of 1.6 billion VND, then the VAT taxable amount for each payment is as follows:

Value for the first VAT calculation:

2.4 billion - 30% x 3 billion = 1.5 billion VND

Value for the second VAT calculation is:

4 billion - 50% x 3 billion = 2.5 billion VND

Value for the third VAT calculation is:

1.6 billion - 20% x 3 billion = 1 billion VND

For business entities that lease land from the State to invest in infrastructure for leasing purposes, the value for VAT calculation is the leasing price of the infrastructure excluding VAT minus the land rental fee payable to the state budget.

Example 11: Company Y for Industrial Park Investment and Business Development is leased 500,000 square meters of land for 50 years to build technical infrastructure for leasing. The land leasing price is 300,000 VND/square meter/year. After investing in infrastructure, Company Y leases 5,000 square meters to Company Z for 20 years to construct a production factory at a leasing price of 800,000 VND/square meter/year without VAT (excluding public utility fees). Company Z pays the infrastructure rental annually.

The value for VAT calculation on the annual rental income from leasing infrastructure by Company Y for Industrial Park Investment and Business Development to Company Z is:

(5,000 square meters x 800,000 VND) - (5,000 square meters x 300,000 VND) x 1 year = 2,500,000,000 VND.

VAT amount is: 2,500,000,000 VND x 10% = 250,000,000 VND.

1.9. For agency, brokerage activities in buying and selling goods and services, and consignment import and export earning commission or brokerage fees, the value for VAT calculation is the commission or brokerage fees earned from these activities excluding VAT.

1.10. For goods and services using payment vouchers indicating a payment price including VAT such as stamps, transport fare tickets, lottery tickets... the price excluding VAT is determined as follows:

1.11. For electricity from hydroelectric power plants under the Vietnam Electricity Corporation, the value for VAT calculation to determine the amount of VAT paid locally where the plant is located is calculated as 60% of the average retail electricity price of the previous year, excluding VAT. In cases where the previous year's average retail electricity price cannot be determined, it will be based on the provisional price announced by the Corporation but not lower than the average retail electricity price of the immediately preceding year. When the previous year's average retail electricity price is determined, the difference will be adjusted in the declaration period of the month when the official price is available. Determination of the previous year's average retail electricity price must be completed no later than March 31 of the following year.

1.12. For casino services, electronic games with prizes, and entertainment businesses with bets, the amount received from these activities including both special consumption tax and the prize money paid out to customers.

The tax base is calculated using the following formula:

Example 12: A business entity providing casino services has the following figures during the tax period:

- The amount collected from exchanging money for customers before playing at the exchange counter is: 43 billion VND.

- The amount refunded to customers after playing is: 10 billion VND.

The actual revenue of the business: 43 billion VND - 10 billion VND = 33 billion VND

The amount of 33 billion VND is the business revenue including VAT and excise tax.

The taxable price for VAT is calculated as follows:

1.13. For transportation and loading/unloading services, the value for VAT calculation is the freight rate and loading/unloading charges excluding VAT, regardless of whether the service is provided directly or subcontracted.

1.14. For tourism services under travel contracts signed with customers at a full package price (food, accommodation, transportation), the full package price is considered to include VAT.

If the full package price includes airfare for transporting tourists from abroad to Vietnam, from Vietnam to abroad, food, accommodation, sightseeing expenses, and other expenses incurred overseas (if supported by valid documentation), then the amounts collected from customers for these expenses can be deducted from the taxable revenue (turnover) for VAT calculation.

Example 13: Ho Chi Minh City Tourism Company implements a tour contract with Thailand under a full package for 50 tourists for five days in Vietnam with a total payment of 32,000 USD. Vietnam is responsible for all airfare, food, accommodation, and sightseeing costs according to the agreed program; of which, the round-trip airfare from Thailand to Vietnam and vice versa costs 10,000 USD. Exchange rate: 1 USD = 17,000 VND.

The taxable price for VAT under this contract is calculated as follows:

+ VAT taxable revenue is:

(32,000 USD - 10,000 USD) x 17,000 VND = 374,000,000 VND

- The taxable price is:

Example 14: Hanoi Tourism Company implements a contract to bring tourists from Vietnam to China under a full package price of 400 USD per person for five days. Hanoi Tourism Company must pay 300 USD per person to the Chinese Tourism Company, so the taxable revenue of Hanoi Tourism Company is 100 USD per person (400 USD - 300 USD).

1.15. For pawnshop services, the value for VAT calculation is the amount to be collected from this service including interest income from lending and other income generated from selling pawned items (if applicable).

The amount collected from this service as described above is inclusive of VAT.

Example 15: A pawnshop company has a turnover of 110 million VND during the tax period.

+ The value for VAT calculation is determined as follows:

1.16. For books subject to VAT sold at the published price (cover price) as stipulated by the Law on Publishing, that price is considered to include VAT for VAT calculation and revenue determination. In cases where sales are made at prices other than the cover price, VAT is calculated on the sale price.

1.17. For printing activities, the value for VAT calculation is the printing fee. Where a printing entity performs printing contracts and the payment includes both the printing fee and paper cost, the value for VAT calculation includes the paper cost.

1.18. For agency appraisal, agency claim settlement, agency third-party compensation recovery, and agency damage processing services earning 100% commission or brokerage fees, the value for VAT calculation is the commission or brokerage fees earned (without deducting any expenses) that the insurance company collects, excluding VAT.

The value for VAT calculation is determined in Vietnamese dong. Where taxpayers have revenues in foreign currency, they must convert them to Vietnamese dong at the average interbank foreign exchange rate published by the State Bank at the time of revenue generation to determine the value for VAT calculation.

2. The time of determining VAT is as follows:

- For the sale of goods, it is the time of transferring ownership or usage rights of the goods to the buyer, regardless of whether the payment has been received or not.

- For the provision of services, it is the time of completing the service provision or issuing an invoice for the service provision, regardless of whether the payment has been received or not.

- For the provision of electricity and clean water services, it is the date recorded on the meter for the consumption of electricity and water to be noted on the invoice for payment.

- For real estate trading activities, infrastructure construction, house building for sale, transfer, or rental, it is the time of receiving money according to the project implementation progress or the payment schedule stipulated in the contract. Based on the amount of money received, the business entity shall declare the output VAT generated during the period.

- For construction and installation activities, it is the time of acceptance and handover of the completed construction works, sections, or quantities, regardless of whether the payment has been received or not.

- For imported goods, it is the time of registering the customs declaration form.

II. VAT RATE:

The VAT rate applicable to goods and services is as follows:

1. Zero percent rate: applied to exported goods and services; construction and installation works of export processing enterprises; goods sold to tax-free shops; international transportation; goods and services exempt from VAT when exported, except for cases not subject to the zero percent rate as specified in point 1.3 of this Section.

1.1. Exported goods and services:

a) Exported goods include:

- Goods exported abroad, including entrusted exports;

- Goods sold to non-tariff zones as prescribed by the Prime Minister; goods sold to duty-free shops;

- Cases considered as exports under trade laws:

+ Goods processed for re-export under the provisions of the law on international trade activities and agency purchase, sale, and processing of goods with foreign countries.

+ Goods processed for export in place according to the laws on international trade and related agency activities involving buying, selling, and processing goods with foreign countries.

+ Goods exported for sale at overseas exhibitions.

b) Exported services include services directly provided to organizations and individuals outside the country or within non-tariff zones.

An organization outside the country is a foreign organization without a permanent establishment in Vietnam and not a VAT taxpayer in Vietnam.

Individuals outside the country who are foreigners not residing in Vietnam, Vietnamese citizens residing abroad, and those outside Vietnam during the supply of services.

Organizations and individuals within non-tariff zones registered for business and other cases as prescribed by the Prime Minister.

c) Other goods and services:

- Construction and installation works of export processing enterprises.

- International transportation including passenger, luggage, and cargo transportation along international routes from Vietnam to another country or vice versa. In case the international transportation contract includes domestic segments, the international transportation also includes such domestic segments.

- Goods and services exempt from VAT when exported, except for cases not subject to the zero percent rate as specified in point 1.3 of this Section.

- Aircraft and ship repair services provided to foreign organizations and individuals.

1.2. Exported goods and services subject to the zero percent rate must meet the following conditions:

- Having a sales contract, processing contract, or consignment export contract for goods; consignment processing contract for exported goods; service supply contract with organizations or individuals outside the country or within non-tariff zones.

- Having payment documents for exported goods and services through banks and other documents as prescribed by law.

- Having a customs declaration form for exported goods.

For aircraft and ship repair services provided to foreign organizations and individuals to apply the zero percent rate, in addition to the above conditions, the aircraft and ships must go through import procedures upon entry into Vietnam and export procedures upon completion of repairs.

1.3. Cases not subject to the zero percent rate include:

- Reinsurance abroad; technology transfer, intellectual property transfer abroad; capital transfer, credit provision, securities investment abroad; derivative financial services; outbound postal and telecommunications services; exported products that are raw materials and minerals extracted without further processing; goods and services supplied to individuals not registered for business within non-tariff zones, except for other cases as prescribed by the Prime Minister.

- Gasoline and diesel sold to businesses within non-tariff zones purchased domestically.

- Cars sold to organizations and individuals within non-tariff zones.

- Services provided by domestic businesses to organizations and individuals within non-tariff zones but consumed outside such zones, such as renting houses, conference halls, offices, hotels, warehouses; transportation and employee pick-up and drop-off services.

2. Five percent rate applies to the following goods and services:

2.1. Clean water for production and daily use, excluding bottled and canned drinking water and other beverages subject to a ten percent rate.

2.2. Fertilizers; ores for fertilizer production; pesticides and growth stimulants for livestock and crops.

a) Fertilizers include organic and inorganic fertilizers such as phosphorus fertilizers, nitrogen fertilizers (urea), NPK fertilizers, mixed nitrogen fertilizers, phosphate fertilizers, gypsum; microbial fertilizers and other types of fertilizers.

b) Ores for fertilizer production include raw materials for fertilizer production such as apatite ore for phosphorus fertilizers and mud for microbial fertilizers.

c) Pesticides and growth stimulants for livestock and crops.

2.3. Livestock and poultry feed and other animal feeds, including processed or unprocessed types such as bran, oil cakes, fish meal, bone meal, and other feeds used for livestock, poultry, and animals.

2.4. Excavation, dredging, and channel maintenance services for agricultural production; cultivation, care, and pest control for crops; preliminary processing and preservation of agricultural products (excluding internal field channel dredging as specified in point 3, Section II, Part A of this Circular).

Preliminary processing and preservation of agricultural products include drying, sun-drying, peeling, shelling, slicing, milling, cold storage, salting, and other common preservation methods.

2.5. Unprocessed or only preliminarily processed agricultural, livestock, aquatic, and marine products at the commercial trading stage, excluding wood, bamboo shoots, and products specified in point 1 of Section II, Part A of this Circular.

Unprocessed crop products referred to herein include rice, corn, potatoes, cassava, wheat.

2.6. Raw latex such as cup lump, sheet, ribbon, and crumb; raw rosin; fishing nets, ropes, and threads for making fishing nets, including specialized threads and ropes for making fishing nets regardless of the production material.

2.7. Fresh food; unprocessed forest products at the commercial trading stage, excluding wood, bamboo shoots, and products specified in point 1 of Section II, Part A of this Circular.

Fresh food includes various foods that have not been cooked or transformed into other products, only preliminarily processed in forms such as cleaning, peeling, slicing, freezing, and drying, still remaining as fresh food like meat from livestock and poultry, shrimp, crab, fish, and other seafood products.

Unprocessed forest products include products from natural forests harvested in groups such as teak, rattan, bamboo, reed, mushroom, wood ear fungus; roots, leaves, flowers, medicinal plants, tree sap, and other forest products.

2.8. Sugar; by-products in sugar production, including syrup, bagasse, and mud residue.

2.9. Products made from rush, straw, bamboo, reed, rattan, palm leaves, rice straw, coconut shells, coconuts, duckweed, and other handicraft products produced using agricultural waste materials include those manufactured primarily from rush, straw, bamboo, reed, rattan, palm leaves such as: rush mats, rush fibers, rush bags, coconut husk mats, rush and straw mats, bamboo and rattan curtains, bamboo brooms, leaf hats; raw cotton; printing paper.

2.10. Machinery and equipment specifically used for agricultural production, including plows, harrows, transplanters, seed drills, rice threshers, harvesters, combine harvesters, agricultural product harvesters, insecticide sprayers or tanks.

2.11. Medical equipment and devices including specialized machines and tools for medical purposes such as: various types of diagnostic and imaging machines used for diagnosis and treatment; surgical and wound treatment equipment, ambulances; blood pressure monitors, heart rate monitors, blood transfusion equipment; syringe pumps; contraceptive devices and other specialized medical equipment.

Medical cotton, bandages, and sanitary napkins; medicines for prevention and treatment, including finished drugs, drug ingredients, except functional foods; vaccines, medical biological products, distilled water for preparing injectable medications and infusions; chemical testing and disinfection supplies used in healthcare.

2.12. Teaching aids used for teaching and learning, including models, drawings, boards, chalks, rulers, compasses, and specialized equipment and tools for teaching, research, and scientific experiments.

2.13. Cultural activities, exhibitions, physical education, sports; artistic performances; film production; importation, distribution, and screening of films.

a) Cultural activities, exhibitions, and physical education and sports, excluding revenues from sales of goods, renting of venues, booths at fairs and exhibitions.

b) Artistic performance activities such as: traditional opera, cheo, cải lương, singing, dancing, music, drama, circus; other artistic performance activities and services organizing artistic performances by theaters or troupes of traditional opera, cheo, cải lương, singing, dancing, music, drama, circus with permits issued by competent state authorities.

c) Film production; importation, distribution, and screening of films, except for products specified in Point 15, Section II, Part A of this Circular.

2.14. Children's toys; various types of books, except books exempt from VAT as specified in Point 15, Section II, Part A of this Circular.

2.15. Science and technology services include activities serving scientific research and technological development; activities related to intellectual property rights; information, advisory, training, enhancement, dissemination, application of scientific and technological knowledge and practical experience, excluding online games and internet entertainment services.

3. The tax rate of 10% applies to goods and services not specified in Section II, Part A; Points 1 and 2 of Section II, Part B of this Circular.

The VAT rates mentioned above are uniformly applied to each type of goods and service at all stages of importation, production, processing, or commercial trade.

Example 16: If clothing is subject to a 10% tax rate, then this item will be taxed at 10% at all stages of importation, production, processing, or commercial trade.

Businesses dealing with multiple goods and services with different VAT rates must declare VAT according to the prescribed rates for each type of good or service; if the business does not specify according to each rate, they must calculate and pay taxes based on the highest rate applicable to the goods or services produced or traded by the business.

During implementation, if there are cases where the VAT rate in the VAT Rate Table according to the Import Tariff Schedule does not align with the guidance provided in this Circular, the guidance in this Circular shall apply. In cases where the VAT rate applied is inconsistent between imported goods and domestically produced goods of the same type, local tax authorities and customs offices shall report to the Ministry of Finance for timely unified guidance.

III. METHODS OF CALCULATING VALUE-ADDED TAX

Businesses pay VAT according to one of two methods: the deduction method and the direct calculation method on value-added.

The application criteria and determination of tax payable under each method are as follows:

1. The deduction method

1.1. The deduction method applies to businesses that fully comply with accounting records, invoices, and receipts as stipulated by laws on accounting, invoices, and receipts, and have registered to pay taxes using the deduction method, except for entities required to calculate taxes using the direct calculation method on value-added as specified in Point 2 of this Section.

1.2. Determining the VAT payable:

Where:

a) The output VAT amount equals the total VAT amount of goods and services sold recorded on the VAT invoice.

The VAT amount recorded on the VAT invoice is calculated by multiplying the taxable price of the goods and services sold by the applicable VAT rate.

When using invoices showing payment prices inclusive of VAT, the output VAT is determined by subtracting the taxable price specified in Point 1.10 of Section II of this Part from the payment price.

Businesses subject to VAT calculation using the deduction method when selling goods or services must calculate and collect VAT on the sold goods or services. When issuing sales invoices, businesses must clearly indicate the sale price excluding VAT, the VAT amount, and the total amount payable by the buyer. If the invoice only shows the payment price (except in cases permitted to use special receipts), without indicating the price excluding VAT and the VAT amount, the VAT on the sold goods or services must be calculated based on the payment price shown on the invoice or receipt.

Example 17: A company sells steel, the sale price excluding VAT for steel F6 is: 11,000,000 VND per ton; the VAT at 10% is 1,100,000 VND per ton, but when selling, some invoices only show the sale price as 12,100,000 VND per ton, then the VAT on the sales revenue is calculated as: 12,100,000 VND per ton x 10% = 1,210,000 VND per ton instead of calculating on the price excluding VAT which is 11,000,000 VND per ton.

Businesses must comply with accounting, invoice, and receipt regulations as stipulated by laws on accounting, invoices, and receipts, and the guidance provided in Section IV, Part B of this Circular. In cases where invoices incorrectly state the VAT rate and the business has not self-corrected, upon discovery by the tax authority, it will be handled as follows:

For businesses selling goods and services: If the VAT rate stated on the invoice is higher than the rate prescribed in tax regulations on VAT, they must declare and pay VAT according to the rate stated on the invoice; if the VAT rate stated on the invoice is lower than the rate prescribed in tax regulations on VAT, they must declare and pay VAT according to the rate prescribed in tax regulations on VAT.

b) Input VAT equals the total amount of VAT stated on VAT invoices for purchasing goods and services (including fixed assets) used for producing and trading goods and services subject to VAT, the amount of VAT stated on tax payment certificates for imported goods, or VAT payment certificates issued on behalf of foreign entities without Vietnamese legal status and foreign individuals conducting business or generating income in Vietnam, as guided by the Ministry of Finance.

In cases where purchased goods or services are types that use special documents indicating the price including VAT, the business can base the determination of the price excluding VAT and input VAT on the method specified in Point 1.10, Section I, Part B of this Circular.

Example 18: During the period, Company A pays for input services eligible for deduction with a special type:

Total payment price 110 million VND (inclusive of VAT), this service is subject to a 10% tax rate, the input VAT deductible amount is calculated as follows:

Price excluding VAT is 100 million VND, VAT amount is 10 million VND.

In cases where the VAT rate recorded on the invoice is incorrect and the businesses have not self-corrected, and the tax authority discovers this during inspection, the following measures will be taken:

For businesses purchasing goods and services: If the VAT rate stated on the purchase invoice is higher than the rate prescribed in tax regulations on VAT, the deductible input VAT shall be calculated based on the rate prescribed in tax regulations on VAT; if it can be determined that the seller has declared and paid taxes according to the rate stated on the invoice, the deductible input VAT shall be calculated based on the rate stated on the invoice but must be confirmed by the tax authority directly managing the seller; if the VAT rate stated on the invoice is lower than the rate prescribed in tax regulations on VAT, the deductible input VAT shall be calculated based on the rate stated on the invoice.

c) Determining deductible input VAT:

c.1. Input VAT of goods and services used for producing and trading goods and services subject to VAT is fully deductible.

c.2. Input VAT of goods and services used simultaneously for producing and trading goods and services subject to VAT and not subject to VAT is only deductible for the portion of input VAT related to goods and services used for producing and trading goods and services subject to VAT. The business must separately account for deductible VAT input and non-deductible VAT input; if separate accounting is not possible, the deductible input VAT shall be calculated based on the ratio (%) between the turnover subject to VAT and the total turnover of sold goods and services.

c.3. Input VAT of fixed assets used simultaneously for producing and trading goods and services subject to VAT and not subject to VAT is fully deductible.

Input VAT of fixed assets in the following cases shall not be deducted but included in the original cost of the fixed asset: specialized fixed assets serving the production of weapons and military equipment for national defense and security; fixed assets such as office buildings and specialized equipment serving credit activities of credit organizations, life insurance companies, securities trading enterprises, hospitals, schools; civil aircraft, pleasure yachts not used for commercial cargo and passenger transport, tourism, and hotel operations.

Input VAT of goods and services forming fixed assets such as cafeterias, rest houses, free housing, changing rooms, parking lots, bathrooms, water tanks serving workers in production and trading areas, and medical stations for workers in industrial zones is fully deductible.

Fixed assets being passenger cars with up to 9 seats (excluding those used for commercial cargo and passenger transport, tourism, and hotel operations) with a value exceeding 1.6 billion VND, the corresponding input VAT for the excess value over 1.6 billion VND shall not be deductible.

c.4. Agricultural, forestry, aquaculture, and fishery production bases with organized closed-loop production systems, centralized accounting of production and business results using products from agricultural and forestry production stages; aquaculture and fishing as raw materials to produce goods subject to VAT (including unprocessed agricultural, forestry, and aquatic products for export or processed products subject to VAT) may declare and deduct input VAT for all stages of basic construction investment, production, and processing. In cases where the entity sells goods as unprocessed or minimally processed agricultural, forestry, aquaculture, and fishery products not subject to VAT, the deductible input VAT for purchased goods and services shall be calculated based on the ratio (%) of the turnover of goods and services subject to VAT compared to the total turnover of sold goods and services.

c.5. Input VAT of goods and fixed assets purchased that suffer losses or damage due to natural disasters, fires, or unexpected accidents shall not be deductible.

c.6. Input VAT of goods (including externally purchased goods or goods produced by the enterprise itself) used by the enterprise for promotional and advertising purposes serving the production and trading of goods and services subject to VAT is deductible.

c.7. Input VAT of goods and services used for producing and trading goods and services not subject to VAT as specified in Section II, Part A of this Circular is included in the original cost of fixed assets, material costs, or business expenses. Except for the following cases:

- The value-added tax on goods and services purchased by a business entity for producing and trading goods and services provided to foreign organizations and individuals, international organizations for humanitarian aid and non-repayable assistance as specified in point 19.e Section II Part A of this Circular shall be fully deducted;

- The input value-added tax on goods and services used for activities of searching, exploring, and developing oil and gas fields shall be fully deducted;

c.8. Input value-added tax arising in a month shall be declared and deducted when determining the tax payable for that month, regardless of whether it has been consumed or remains in stock. In case a business entity discovers that the input value-added tax declared and deducted is missing invoices or tax payment documents not yet declared and deducted, such taxes may be declared and deducted additionally; the maximum time limit for declaring and deducting additionally is six months from the month in which the missing invoices or tax payment documents were issued;

Example 19: Business entity A has one input VAT invoice dated February 10, 2009. During the tax declaration period for February 2009, the accountant of the business entity failed to declare this invoice. Therefore, Business entity A can declare and deduct this invoice additionally up to the tax declaration period for July 2009;

c.9. Input value-added tax that cannot be deducted, the business entity may record it as expenses for calculating corporate income tax or include it in the original cost of fixed assets according to the provisions of the law;

c.10. The offices of State-owned corporations, groups that do not directly engage in business operations and administrative units under them such as hospitals, health stations, rest houses, institutes, training schools... which are not subject to VAT shall not be entitled to deduct or refund input VAT on goods and services purchased for their operations;

If these units engage in business activities subject to VAT, they must register and declare payment of VAT separately for these activities.

Example 20: Office of Corporation A does not directly produce or trade, using funds contributed by its affiliated entities to operate but if the office rents out unused space, it must separately account for and declare VAT for rental activities. Input VAT on goods and services for the operation of the office shall not be deductible or refunded. The office must use the funds allocated by superiors for payments;

1.3. Conditions for deducting input value-added tax are stipulated as follows:

a) There must be a valid VAT invoice for goods and services purchased or tax payment certificate for import VAT or tax payment certificate for VAT paid on behalf of foreign parties according to the guidelines of the Ministry of Finance applicable to foreign organizations without Vietnamese legal status and foreign individuals conducting business or generating income in Vietnam;

b) There must be bank payment vouchers for goods and services purchased, except for cases where the total value of goods and services purchased per invoice is less than twenty million dong including VAT;

Goods and services purchased per invoice with a value exceeding twenty million dong including VAT, if there is no bank payment voucher, shall not be deductible. For these invoices, the business entity shall declare them in a separate section of the purchase invoice and document declaration form;

For goods and services purchased on credit or installment basis with a value exceeding twenty million dong, the business entity shall base on the purchase contract, VAT invoice, and bank payment vouchers for goods and services purchased on credit or installment basis to declare and deduct input VAT, while clearly noting the payment deadline in the remarks section of the purchase invoice and document declaration form. If there is no bank payment voucher due to the payment deadline not being reached according to the contract, the business entity can still declare and deduct input VAT. Upon reaching the payment deadline, if there is no bank payment voucher, the input VAT deduction will not be allowed, and the business entity must declare and adjust the reduction of input VAT already deducted for the value of goods without a bank payment voucher;

Example 21: In January 2009, Company A purchased a batch of goods from Company B for production and business purposes, with a total contract value of 330 million dong (including VAT at a rate of 10%). According to the agreement in the contract, Company A would pay for the goods to Company B in May 2009;

In this case, Company A can temporarily declare input VAT in the tax declaration period of January 2009 amounting to 30 million dong. By the payment deadline in May 2009, Company A must provide a bank payment voucher worth 330 million dong. If Company A cannot provide a bank payment voucher, the temporarily deducted VAT (30 million dong) of January 2009 must be declared and adjusted to reduce the input VAT deduction in the tax declaration period of May 2009;

If by the payment deadline in May 2009, Company A provides a bank payment voucher but the amount recorded on the payment voucher is 275 million dong, then Company A can only deduct VAT of 25 million dong, and simultaneously, Company A must adjust the reduction of input VAT deduction in the tax declaration period of May 2009 by 5 million dong;

Goods and services purchased through offsetting methods between the value of purchased goods and services and the value of sold goods; offsetting accounts receivable; third-party authorized payment through banks, where these payment methods are specifically stipulated in the contract, are considered as bank payments. After implementing the aforementioned payment methods, if the remaining value is paid in cash and exceeds twenty million dong, it can only be deducted if there is a bank payment voucher. When declaring the VAT invoice for input VAT, the business entity must clearly note the specific payment method stipulated in the contract in the remarks section of the purchase invoice and document declaration form.

In the case of purchasing goods or services from a supplier with a value under twenty million dong but making multiple purchases on the same day with a total value exceeding twenty million dong, tax deduction shall only be allowed if there is a payment transaction record through a bank.

c) Goods and services for export (except for the cases guided at point 1d and point 1đ of this Section) to be eligible for tax deduction and VAT refund on input tax must meet the conditions and procedures specified in items a and b of this point and point 1.2 of Section II Part B of this Circular, specifically as follows:

c.1. A sales contract for goods, a processing contract for goods (in the case of processing goods), and a service supply contract for foreign organizations and individuals. For the case of entrusted export, it is the entrusted export contract and the liquidation record of the entrusted export contract (if the contract has been concluded) or the periodic account reconciliation statement between the entrusting party and the entrusted party for export, clearly indicating: quantity, type of products, value of entrusted goods exported; number, date of the export contract signed by the entrusted party with foreign parties; number, date, amount recorded on the bank payment voucher of the entrusted party with foreign parties; number, date, amount recorded on the payment voucher of the entrusted party paying to the entrusting party; number, date of the customs declaration form for exported goods of the entrusted party.

c.2. The customs declaration form for exported goods with confirmation of export by the customs authority.

For businesses exporting software products in the form of documentation, files, packaged databases to be eligible for tax deduction and VAT refund on input tax, the business must ensure the customs declaration procedures as required for general goods.

However, in the following cases, there is no need for a customs declaration form:

- For businesses exporting services and software via electronic means, there is no need for a customs declaration form. The business must fully comply with the regulations regarding the confirmation that the buyer has received the exported services and software via electronic means according to the laws on e-commerce.

- Construction and installation works of export processing enterprises.

- Businesses providing electricity, water, office supplies, daily necessities for enterprises in export processing zones.

c.3. Goods and services for export must be settled through a bank as follows:

Bank settlement refers to the transfer of funds from the importer's account to the exporter's account opened at a bank in accordance with the payment methods agreed upon in the contract and the bank's regulations. The payment transaction document is the bank statement showing the receipt of funds from the importer's account by the exporter's bank. In the case of delayed payment, there must be an agreement recorded in the export contract, and at the time of payment, the business must have a bank payment document. In the case of entrusted export, the entrusted party for export must settle the payment with foreign parties through a bank.

- The following payment methods are also considered as bank settlement:

+ When goods and services for export are paid off against foreign debt, the business must meet the following conditions, procedures, and documents:

(1) Loan contract (for financial loans with a term of less than one year); or registration certificate of the loan issued by the State Bank of Vietnam (for loans over one year).

(2) Payment transfer document from the foreign side to Vietnam through a bank.

The method of settling exported goods and services by offsetting against foreign debt must be stipulated in the export contract.

(3) Confirmation from the foreign side about offsetting the loan debt.

(4) If there is a difference in value after offsetting the export goods and services against the foreign debt, the difference must be settled through a bank. The bank payment document shall be in accordance with the guidance provided in this point.

+ When a business uses the proceeds from the sale of exported goods and services to invest in a foreign importing entity, the business must meet the following conditions, procedures, and documents:

(1) Investment contract.

(2) The use of proceeds from the sale of exported goods and services for investment in a foreign importing entity must be stipulated in the export contract.

(3) If the investment amount is less than the revenue from exported goods, the difference must be settled through a bank in accordance with the guidance provided in this point.

+ When an exporting business settles the payment for exported goods and services through a bank, but the foreign party authorizes a third party abroad to make the payment, the payment under authorization must be stipulated in the export contract (as an annex to the contract or an amendment to the contract, if applicable).

+ When the foreign party authorizes its representative office in Vietnam to make payments to the exporter's account and the authorization for payment is stipulated in the export contract (as an annex to the contract or an amendment to the contract, if applicable).

+ When the foreign party requests a third party in Vietnam to offset debts with the foreign party by making a bank payment of the amount the foreign party owes to the exporter, and such request for offsetting debts is stipulated in the export contract (as an annex to the contract or an amendment to the contract, if applicable) and there is a payment document which is the bank statement showing the receipt of funds from the third party's account, while the exporter must present a debt reconciliation statement confirmed by both the foreign party and the third party.

+ When the foreign party makes payment from a current account opened at credit institutions in Vietnam, such payment must be stipulated in the export contract (as an annex to the contract or an amendment to the contract, if applicable). The payment document is the bank statement showing the receipt of funds from the foreign party's current account.

- Other payment methods for exported goods and services as prescribed by the Government:

+ In cases where labor export businesses directly collect money from workers, they must have receipts for cash collected from workers.

+ For businesses exporting goods to sell at trade fairs or exhibitions abroad, if they collect and transfer foreign currency cash back to the country at the location of the fair or exhibition, such businesses must have declarations with customs authorities regarding the foreign currency received from selling goods transferred back to the country and receipts for depositing funds into banks in Vietnam.

+ When exporting goods or services to settle foreign debts for the Government, confirmation from the foreign trade bank about the exported consignment being accepted by the foreign side to offset the debt or confirmation that the set of documents has been sent to the foreign side to offset the debt must be provided; payment documents shall be carried out according to the guidelines of the Ministry of Finance.

+ In cases where goods or services are exported and paid for in kind, this refers to exporting goods (including processing goods for export) or providing services to foreign organizations or individuals (referred to as the foreign side), but the settlement between Vietnamese enterprises and the foreign side is done through offsetting the value of exported goods or services and processing fees for exported goods against the value of goods purchased from the foreign side.

Exported goods and services paid in kind must include additional procedures and documents as follows:

(1) The method of payment for exports in kind must be stipulated in the export contract.

(2) Purchase contracts for goods or services from the foreign side;

(3) Customs declaration for imported goods settled by offsetting against exported goods or services.

(4) Documentation confirming with the foreign side on the amount of offsetting payments between exported goods or services and imported goods or services purchased from the foreign side.

(5) If there is a difference after offsetting the value of exported goods or services against the value of imported goods or services, the difference must be settled through a bank. Payment documents through the bank shall follow the guidelines provided herein.

+ For the export of goods to neighboring countries as regulated by the Prime Minister's directives on managing border trade with neighboring countries, such activities shall be carried out according to the guidelines of the Ministry of Finance and the State Bank.

+ Some cases of goods or services exported may have other forms of payment as prescribed by relevant laws.

c.4. VAT invoices for selling goods or services or invoices for processing fees for processed goods.

d) Conditions, procedures, and documents for deducting VAT input tax for certain export goods:

d.1. Intermediate processed goods according to the provisions of commercial law on international trade activities and agency purchase, sale, and processing activities with foreign countries:

- Export processing contracts and related contract accessories (if any) signed with foreign parties, clearly stating the receiving entity in Vietnam.

- VAT invoices detailing the processing fee and quantity of processed goods delivered to foreign parties (as specified in the contract signed with foreign parties) and the name of the receiving entity designated by the foreign party;

- Transfer certificates for intermediate processed goods (referred to as Transfer Certificates) bearing signatures of both the transferring and receiving parties and confirmation from the customs authority overseeing the export processing contract.

- Payments for processed goods for foreign parties must be made through a bank according to the guidelines in point c.3 above.

Procedures for transferring intermediate processed goods and Transfer Certificates shall be carried out according to the guidelines of the General Department of Customs.

Example 22: Company A signs an export processing contract with a foreign party for 200,000 pairs of shoe soles, with a processing fee of 800 million VND. The contract specifies delivering the soles to Company B in Vietnam for the production of complete shoes.

In this case, Company A is considered an intermediary exporter. When issuing the transfer certificate for the soles to Company B, Company A must clearly state the quantity, type, specifications of the products transferred, and the total processing fee revenue of 800 million VND, subject to a 0% VAT rate.

d.2. Goods processed for immediate export according to the provisions of commercial law on international trade activities and agency purchase, sale, and processing activities with foreign countries:

- Sales contracts signed with foreign parties, specifying the product, quantity, value, and the name and address of the receiving enterprise in Vietnam.

- Customs declarations for immediate import-export transactions, confirmed by customs authorities regarding the goods delivered to the enterprise in Vietnam as designated by the foreign side.

- Goods sold to foreign traders but delivered in Vietnam must be paid for through a bank using freely convertible foreign currency. Payment documents through the bank shall follow the guidelines in Point 1.2.c.3 of this Section.

- VAT invoices for immediately exported goods, clearly stating the buyer's name in the foreign country, the receiving enterprise, and the delivery location in Vietnam.

- Goods immediately exported by enterprises with foreign investment must comply with the investment permit.

d.3. Goods and materials exported by Vietnamese enterprises to implement construction projects abroad, the procedures and documents for Vietnamese enterprises to implement construction projects abroad to deduct or refund VAT input tax must meet the following conditions:

- Customs declarations for exported goods.

- Exported goods and materials must comply with the list of goods for implementing construction projects abroad approved by the Director of the Vietnamese enterprise implementing the construction project abroad.

- Entrusted export contracts (in entrusted export cases).

d.4. Goods and materials sold by domestic businesses to Vietnamese enterprises to implement construction projects abroad and delivered abroad according to signed contracts, the procedures and documents for domestic businesses selling goods to deduct or refund VAT input tax for exported goods must meet the following conditions:

- Customs declarations for exported goods confirmed by customs authorities as actually exported.

- Goods and materials for export must comply with the Export Goods Catalogue for construction projects abroad approved by the Director of the Vietnamese enterprise implementing the construction project abroad.

- The purchase and sale contract signed between domestic business establishments and Vietnamese enterprises implementing construction projects abroad, which clearly specifies the delivery conditions, quantity, type, and value of goods;

- The agency contract (in cases of entrusted exports);

- Payment documents through banks;

- VAT invoice for selling goods.

In cases where domestic business establishments have export goods or goods treated as exported as mentioned in point d above, if they have been confirmed by customs authorities (for exported goods) but do not have all other required procedures and documents specific to each case, they shall not be subject to output VAT but shall not be entitled to deduct input VAT. Specifically, for processed goods transferred for further processing and goods sold at the place of export, if they lack any of the required procedures and documents as prescribed, they shall be subject to and required to pay VAT as domestic consumption goods. For business establishments providing export services that do not meet the bank payment requirements or are considered equivalent to bank payments, they shall not apply the 0% VAT rate, shall not be subject to output VAT, but shall not be entitled to deduct input VAT.

d) For individual businesses paying VAT under the direct method on turnover who switch to the deduction method, they may deduct VAT on goods and services purchased from the month they start applying the deduction method; for goods and services purchased before the application of the deduction method, they shall not be entitled to deduct input VAT.

1.3. Business establishments shall not be entitled to deduct input VAT in the following cases: VAT invoices used in violation of legal regulations such as: VAT invoices not recording VAT (except for special cases using VAT invoices recording the settlement price including VAT); failing to record or incorrectly recording one of the items such as the name, address, tax code of the seller, making it impossible to identify the seller; fake VAT invoices, invoices with alterations, blank invoices (without accompanying goods or services); invoices recording values inconsistent with the actual values of purchased or sold goods or exchanged services.

2. Direct Method on Value Added

2.1. The direct method on value added applies to the following entities:

a) Individuals and households conducting business without implementing or not fully implementing accounting systems, invoices, and supporting documents as prescribed by law.

b) Foreign organizations and individuals conducting business without compliance with the Investment Law and other organizations that do not implement or inadequately implement accounting records, invoices, and documents as prescribed by law.

c) Trading activities involving gold, silver, precious stones, and foreign currencies.

In cases where business establishments subject to VAT under the deduction method engage in trading gold, silver, precious stones, and manufacturing products thereof, they must separately account for these trading activities to apply the direct method on value added.

2.2. Determining VAT payable

The amount of VAT due under the direct method of calculating value added tax is calculated by multiplying the value added of taxable goods and services sold by the applicable VAT rate.

a) Value-added of goods and services is determined by subtracting the purchase price from the sales price of goods and services;

The settlement price of goods and services sold is the actual selling price recorded on the sales invoice, including VAT and additional charges and fees received by the seller, regardless of whether payment has been received.

The settlement price of goods and services purchased is determined based on their value, including VAT used for producing and trading taxable goods and services.

The value added is determined for certain business activities as follows:

- For production and trading activities, it is the difference between sales revenue and the cost of materials, goods, and services purchased for production and trading purposes. If a business establishment cannot separately account for the cost of materials, goods, and services purchased corresponding to sales revenue, it shall be determined as follows:

The cost of goods sold equals the beginning period inventory plus purchases during the period minus the ending period inventory.

Example 23: Business establishment A produces wooden furniture, selling 150 units in a month with total sales revenue of 25 million VND.

The cost of external materials and raw materials purchased to produce 150 products is 19 million VND, including:

+ Main raw material (wood): 14 million VND.

+ Other materials and external services: 5 million VND.

The VAT rate is 10%, the VAT that entity A must pay is calculated as follows:

+ VAT on sold products:

25 million VND - 19 million VND = 6 million VND.

+ VAT payable:

6 million VND x 10% = 0.6 million VND.

- For construction and installation, it is the difference between income from construction and installation work minus costs of raw materials, power, transportation, services, and other external expenses incurred for construction and installation work.

- For transportation activities, it is the difference between transportation and loading/unloading income and the costs of fuel, spare parts, and other expenses purchased externally for transportation activities.

- For catering activities, it is the difference between income from selling food and beverage and other revenues and the cost of external goods and services used for catering activities.

- For trading activities involving gold, silver, precious stones, and foreign currencies, the value added is the difference between sales revenue from these commodities minus their cost of sales.

- For business establishments subject to VAT under the deduction method that engage in trading gold, silver, precious stones, and foreign currencies using the direct method on value added, the establishment must separately account for input VAT to declare VAT payable for goods and services according to each trading activity and the respective tax calculation method.

If separate accounting is not possible, the deductible input VAT can be allocated proportionally based on the ratio of sales revenue from goods and services subject to VAT calculated under the deduction method to the total sales revenue generated during the period.

- For other business activities, it is the difference between income from business activities and the cost of external goods and services used for those activities.

- Business establishments subject to VAT under the direct method on value added shall not include the value of externally purchased assets, investments, and constructions as fixed assets in the cost of goods and services purchased for calculating value added.

b) For business establishments selling goods and services with complete invoices for sold goods and services as prescribed or sufficient conditions to accurately determine sales revenue from goods and services such as contracts and payment documents, but lacking purchase invoices, VAT shall be determined by multiplying sales revenue by the applicable VAT rate.

The percentage rate of value-added tax calculated on sales revenue as the basis for determining the value-added tax is specified as follows:

- Commerce (distribution, supply of goods): 10%.

- Services, construction (excluding construction that includes provision of raw materials): 50%.

- Production, transportation, services attached to goods, construction including provision of raw materials: 30%.

c) Businesses, individual traders, and household traders that do not implement or inadequately implement accounting records, invoices, and documents as prescribed by law shall pay taxes at the VAT rate specified by the Ministry of Finance.

IV. INVOICES AND DOCUMENTS FOR PURCHASE AND SALE OF GOODS AND SERVICES

Business entities when buying and selling goods and services must comply with the invoice and recordkeeping system as prescribed by law.

1. Business entities subject to tax deduction method when selling goods or providing services must use VAT invoices. When issuing an invoice, business entities must fully and accurately record all elements specified on the invoice. For VAT invoices, the price excluding VAT, surcharges, and fees outside the price (if any), VAT, and total payment including VAT must be clearly stated. If the price excluding VAT and VAT are not separately recorded but only the total payment is recorded, the output VAT must be calculated based on the total payment, except in cases where special documents are used.

Business entities subject to direct taxation on VAT when selling goods or providing services must use sales invoices.

2. In certain circumstances, the use and recording of invoices and records shall be carried out as follows:

2.1. Production and business entities subject to tax deduction method when selling goods or services exempt from VAT; selling to entities exempted from VAT; selling gold, silver, precious stones, foreign currencies must use VAT invoices. On the VAT invoice, only the price excluding VAT should be recorded, the tax rate and amount of VAT should not be recorded and crossed out. In cases of selling goods or services exempt from VAT or sold to entities exempted from VAT, the invoice must clearly state that they are goods exempt from VAT or goods sold to entities exempted from VAT.

2.2. Import and export business entities subject to tax deduction method for VAT, when receiving imported goods entrusted to other entities, upon returning the goods, the entity receiving the entrustment shall issue documents as follows:

The entity receiving the entrusted import when exporting the entrusted imported goods, if it has already paid VAT at the import stage, it shall issue a VAT invoice for the entrusted importing entity to declare and deduct input VAT for the entrusted imported goods. In cases where the entity receiving the entrusted import has not yet paid VAT at the import stage, when exporting the entrusted imported goods, it shall issue an internal dispatch note accompanied by an internal movement order according to regulations as proof of circulation of goods in the market. After paying VAT at the import stage for the entrusted imported goods, the entity shall issue an invoice according to the regulations.

The VAT invoice for returning entrusted imported goods shall record:

(a) Price excluding VAT includes: actual value of imported goods based on CIF price, import tax, special consumption tax, and other amounts payable under the regulations at the import stage (if any).

(b) VAT rate and amount of VAT recorded according to the amount of tax paid at the import stage.

(c) Total payment (= a + b)

The entity receiving the entrusted import shall issue a separate VAT invoice for commission payment for entrusted import.

2.3. Production and business entities subject to tax deduction method with exported goods (including processing entities for exported goods), subject to VAT, when exporting goods must use VAT invoices.

When exporting goods for transportation to customs checkpoints or places for export procedures, if there is no basis to issue a VAT invoice, the entity shall use an Internal Dispatch Note and Internal Movement Order according to regulations as proof of circulation of goods in the market. After completing the export procedures for goods, the entity shall issue a VAT invoice for exported goods.

In cases of entrusted export of goods, when exporting goods to the entrusted entity, the entity with entrusted export goods shall use an Internal Dispatch Note accompanied by an Internal Movement Order. Upon confirmation of actual export of goods by the Customs authority, based on the comparison and confirmation of quantity and value of actually exported goods by the entrusted export entity, the entity with entrusted export goods shall issue a VAT invoice for declaration and payment of tax, refund of VAT. In this case, the export business entity must retain copy 2 at the enterprise. If the export business entity registers with the Tax authority to print and issue invoices for exported goods to be issued to foreign customers, then the export business entity shall use self-printed invoices for declaration, payment of tax, and refund of tax.

2.4. Use of invoices and records for promotional goods, advertising, samples, gifts, donations, and internal consumption:

a) For goods and services used for promotion, advertising, samples serving production and business activities (products, goods, services used for promotion, advertising, samples according to commercial law on trade promotion activities), a VAT invoice must be issued, on which the name and quantity of goods must be recorded, clearly stating that they are promotional, advertising, sample goods without charge; the tax rate and VAT amount should not be recorded and crossed out.

b) For goods and services used for gifts, donations, exchanges, salary payments to employees, and internal consumption, a VAT invoice (or sales invoice) must be issued, on which all indicators must be fully recorded and VAT calculated as for sales invoices to customers.

For entities using goods and services for internal consumption not serving production and business such as transportation, aviation, railways, postal and telecommunications, no output VAT is required. The entity must clearly define the objects and levels of control over internally consumed goods and services, approved in writing by the competent authority.

2.5. Goods and services with reduced prices must record the reduced price, VAT, and total payment including VAT on the invoice.

If the price reduction is based on the actual quantity or turnover of goods and services purchased reaching a certain level, the amount of price reduction for sold goods can be adjusted on the sales invoice of the last purchase or subsequent period. The invoice must clearly state the invoice number eligible for discount and the amount of discount.

2.6. Production and business establishments may transfer goods to dependent accounting units such as branches or stores in other localities (provinces, centrally governed cities) for sale or to transfer between branches or affiliated units; they may also sell goods to agencies that act as agents for sales at fixed prices and earn commissions based on the business organization and accounting methods. The establishment may choose one of the two ways to use invoices and documents as follows:

a) Using VAT invoices as the basis for payment and tax declaration for VAT at each independent unit and stage;

b) Using Internal Warehouse Outbound Documents accompanied by Internal Movement Orders; Using Wholesale Sales Outbound Documents sent to agency sellers according to regulations for goods sold to agency sellers accompanied by Internal Movement Orders.

Dependent accounting units, branches, stores, and agency sellers must issue invoices in accordance with regulations and provide them to buyers, while simultaneously preparing a Goods Sold List to send back to the establishment transferring goods or the establishment sending goods for sale (collectively referred to as the supplying entity) so that the supplying entity can issue VAT invoices for the actual goods consumed and provide them to the dependent accounting units, branches, stores, or agency sellers.

In cases where the supplying entity has a large volume and turnover of goods sold, the Goods Sold List may be prepared once every five days or ten days. If the goods sold have different VAT rates, separate lists must be prepared for each group of goods based on their respective rates.

Dependent accounting units, branches, stores, and agency sellers must declare and pay VAT on the goods sold to buyers and are entitled to deduct input VAT based on the VAT invoices issued by the supplying entity.

2.7. Businesses acting as agents for purchasing goods must issue invoices for the goods purchased on behalf of others and any commission earned (if applicable) when returning goods to the entrusted purchasing entity.

2.8. When a buyer returns all or part of the goods due to non-compliance with specifications or quality standards after receiving goods from a seller who has already issued an invoice, the buyer must issue an invoice for the returned goods, clearly stating that the goods are being returned to the seller due to non-compliance with specifications or quality standards, including the VAT amount. This invoice serves as the basis for the seller to adjust the sales revenue and output VAT; and for the buyer to adjust the purchase revenue and input VAT.

In cases where the buyer does not have an invoice and returns the goods, both the buyer and seller must prepare a written record or agreement detailing the type of goods, quantity, value of the returned goods without VAT, the VAT amount based on the original invoice (invoice number, date), and the reason for the return, along with the original invoice sent to the seller. This record is kept together with the original invoice to serve as the basis for adjusting the sales revenue and VAT of the seller.

In cases where the seller has shipped and issued an invoice but the buyer has not yet received the goods and discovers non-compliance with specifications or quality standards, the buyer must return all or part of the goods. Both parties must prepare a written record detailing the type of goods, quantity, value without VAT, the VAT amount based on the original invoice (invoice number, date), and the reason for the return, along with the original invoice sent back to the seller. The seller then issues a new VAT invoice for the received goods and uses this as the basis for adjusting the sales revenue and output VAT.

2.9. When a business sells goods or services that do not meet quality, specification, or style requirements or incorrectly records the VAT rate, the seller and buyer must prepare a written record or agreement detailing the quantity of goods, the adjusted price based on the original invoice (invoice number, date, time), the reason for the price adjustment, and the reason for the VAT rate adjustment. The seller must issue an adjusted invoice reflecting the price adjustment (without negative values (-)) and the VAT for the goods or services listed in the original invoice. Based on the adjusted invoice, both parties must adjust their declarations for purchase and sales revenue and input/output VAT. If the VAT rate on the original invoice is higher than the prescribed rate and the buyer cannot be identified, an adjusted VAT invoice should not be issued.

2.10. Businesses selling goods through mobile sales use Internal Warehouse Outbound Documents accompanied by Internal Movement Orders as stipulated, and issue invoices in accordance with regulations when selling goods.

2.11. Businesses directly selling low-value goods or providing services below the specified threshold do not need to issue invoices. If the buyer requests an invoice, the business must issue it in accordance with regulations. If no invoice is issued, a Retail Sales List must be prepared. At the end of the day, the business must base its VAT invoice on the Retail Sales List.

2.12. Construction businesses with long-term construction or installation projects that settle payments based on progress or completed work volumes must issue invoices for the transferred construction or installation work. The VAT invoice must clearly state the revenue excluding VAT and the VAT amount. If the construction project is completed and an invoice for the total project value has been issued, but adjustments are made during final settlement, an adjusted invoice must be issued for the revised payable project value.

2.13. Businesses granted land by the State for investment in building houses for sale or lease; infrastructure for sale or lease; transportation services; international travel agency services must issue invoices as follows:

a) The sales price line shall include the sales price of houses and infrastructure (separately listing the house sales price and land sales price or lease price, infrastructure lease price); transportation service revenue; full package tour revenue from travel agency services, all excluding VAT.

b) The taxable value-added tax (VAT) price line is the price determined according to point 1.8, Section I, Part B of this Circular; revenue from transportation services; tourism revenue minus expenses incurred abroad such as food, accommodation, and transportation costs.

c) The VAT rate line, VAT amount line, and payment price line shall be recorded in accordance with the prescribed regulations.

In cases where real estate businesses, infrastructure construction businesses, house construction businesses for sale or transfer collect money based on project implementation progress or payment schedule stipulated in the contract, when collecting money, the business must issue a VAT invoice. On the invoice, clearly record the amount collected, the land price reduction deducted from the taxable VAT revenue, the VAT rate, and the VAT amount. The land price deduction is calculated as a percentage of the amount collected according to the project implementation progress or payment schedule stipulated in the contract compared to the land price deductible at the time of transfer (the first payment date according to the progress schedule) as prescribed.

2.14. Financial leasing enterprises that lease assets subject to VAT must issue invoices in accordance with the regulations.

Financial leasing enterprises that lease assets subject to VAT must have VAT invoices (for assets purchased domestically) or tax payment certificates for VAT at the importation stage (for imported assets); the total VAT amount recorded on the financial leasing invoice must match the VAT amount recorded on the VAT invoice (or tax payment certificate at the importation stage).

For cases where assets purchased for leasing are not subject to VAT and do not have VAT invoices or tax payment certificates at the importation stage, VAT cannot be recorded on the invoice.

When the VAT of the leased asset has been fully deducted and the ownership rights of the asset have been transferred to the lessee, the lessor must transfer all documentation regarding the origin of the asset to the lessee in accordance with the law.

Financial leasing service businesses are not required to declare and pay VAT on financial leasing services. However, they must declare and calculate taxes on assets leased to other entities for financial leasing that are subject to VAT based on the invoices issued as mentioned above.

Financial leasing service businesses are not required to submit Value Added Tax Declaration Forms for financial leasing services but only need to submit Detailed Sales Invoice Registers for goods and services sold and Detailed Purchases Invoice Registers for goods and services purchased, where the input VAT item only records the VAT amount of the leased asset allocated appropriately to the VAT invoice issued for the financial leasing service revenue during the declaration period. The taxpayer must submit tax declaration documents for assets leased to other entities for financial leasing.

If the lessee fails to fulfill the contract leading to the lessor having to reclaim the asset, the lessor must notify the lessee and clearly state the amount of VAT already paid and the unpaid VAT. When the lessor leases the asset to another entity, the unpaid VAT will be included in the calculation for the new contract.

If the leased asset is sold to the lessee or another entity after a certain period of leasing, the lessor must calculate VAT for the sold asset, issue a VAT invoice, and can only deduct input VAT for the unsold portion of the asset.

If both the lessor and lessee jointly invest in purchasing the asset and the lessor only collects rent (capital and interest) corresponding to their investment, the purchase invoice for the leased asset managed by the lessor until the asset's ownership is transferred to the lessee. The VAT amount corresponding to the lessor’s investment is recorded on the initial payment invoice.

If the financial leasing contract has been completed and the lessee has fully paid the VAT, and both parties agree to continue leasing, the invoice for subsequent revenue does not include VAT.

2.15. Foreign currency trading businesses that engage in foreign currency transactions outside the country must prepare detailed sales registers by each type of foreign currency. They must retain transaction documents with foreign buyers and sellers in compliance with accounting laws. Domestic foreign currency transactions must be invoiced in accordance with the regulations.

2.16. Gold, silver, precious stone trading businesses that purchase from individuals who are not engaged in business and do not have invoices must prepare a goods purchase register.

2.17. Export processing enterprises when selling goods and services must use sales invoices (or self-issued invoices) in accordance with the Ministry of Finance's regulations.

2.18. Invoices and documents for capital contribution assets and asset transfers are implemented as follows:

a) The party contributing capital assets is an individual or organization not engaged in business:

a.1. In cases where individuals or organizations not engaged in business contribute capital assets to limited liability companies or joint-stock companies, the document for the contributed capital assets is the capital contribution certification memorandum and the asset delivery receipt memorandum. If the contributed capital assets are newly purchased and unused assets with a valid invoice accepted by the capital contribution acceptance committee, the capital contribution value is determined according to the invoice value including VAT; the recipient of the capital contribution can declare and deduct the VAT recorded on the invoice for the contributed asset.

a.2. In cases where individuals use their own assets or land use rights to establish private enterprises or law firms, there is no need to go through procedures to transfer asset ownership or land use rights to the private enterprise. If there is no legal document proving the asset's original cost, a valuation document from an appraisal organization in accordance with the law must be prepared as the basis for recording the fixed asset value.

b) The party contributing capital assets or transferring assets is a business:

b.1. Capital contributions to enterprises must include: production and business capital contribution memorandums, joint venture contracts, cooperation contracts; asset valuation memorandums of the capital contribution acceptance committees of the contributing parties (or valuation documents of organizations with appraisal functions in accordance with the law), accompanied by documentation about the origin of the assets.

b.2. Assets transferred between dependent accounting units within a business entity; assets transferred when dividing, splitting, merging, consolidating, or converting the form of a business enterprise shall have the transferring business entity issue an asset transfer order accompanied by the original asset documentation and shall not issue an invoice.

In cases where assets are transferred between independent accounting units or between member units with full legal capacity within the same business entity, the business entity transferring the assets must issue a VAT invoice and declare and pay VAT according to regulations.

 Business entities are not required to declare and pay VAT in the following cases:

- Receiving compensation for land, support for land, resettlement due to land expropriation;

- Contributing assets to establish a business;

- Transferring assets between dependent accounting units within a business;

- Transferring assets when dividing, splitting, merging, consolidating, or converting the form of a business enterprise;

- Collecting from third parties in insurance activities;

- Collections on behalf of others unrelated to the sale of goods or services by the business entity.

2.19. For business entities receiving support funds from other business entities, upon receipt of funds, the business entity shall prepare a receipt document and classify it as other income to declare and pay corporate income tax according to regulations.

For business entities providing support funds, based on the purpose of the support recorded in the support agreement, they shall prepare a payment document.

2.20. For business entities selling goods under forms such as lending, borrowing, or returning goods, they must issue a VAT invoice according to the regulations applicable to ordinary sales transactions.

C. VAT REFUNDS

The objects and cases eligible for VAT refunds are defined as follows:

1. Business entities subject to the tax deduction method who have not fully deducted input VAT for three consecutive months or more are eligible for VAT refunds.

The amount of refundable tax is the un-deducted input VAT during the period for which the refund is requested.

Example 24: Enterprise A declares VAT with the following input and output VAT figures:   

(Unit: million VND)

According to the example above, Enterprise A has accumulated three consecutive months with input VAT exceeding output VAT. Enterprise A is eligible for a VAT refund of 150 million VND.

2. Newly established business entities from registered investment projects that have declared to pay VAT under the tax deduction method, or exploration and development oil and gas projects still in the investment phase and not yet operational, if the investment period is one year or longer, are eligible for VAT refunds on goods and services used for investment annually. If the cumulative input VAT of goods and services purchased for investment reaches 200 million VND or more, then a VAT refund is granted.

3. Operating business entities subject to VAT under the tax deduction method with new investment projects still in the investment phase must declare offsetting the input VAT of goods and services purchased for the new investment project together with the ongoing production and business operations. After offsetting, if the un-deducted input VAT of goods and services purchased for investment reaches 200 million VND or more, then a VAT refund is granted for the investment project.

In cases where operating business entities (excluding industry-wide enterprises) subject to VAT under the tax deduction method have new production facility investment projects in different provinces or centrally-administered cities from their headquarters location, still in the investment phase and not yet operational or registered for business or taxation, if the input VAT of goods and services purchased for investment reaches 200 million VND or more, then a VAT refund is granted for the investment project. The business entity must separately declare and prepare a refund application for this case.

4. Business entities in a month with exported goods and services, if the un-deducted input VAT of exported goods and services generated in the month reaches 200 million VND or more, are eligible for monthly VAT refunds. If the business entity has both exported goods and services and domestic sales in the same month, and the un-deducted input VAT of exported goods and services reaches 200 million VND or more, but after offsetting with the output VAT of domestic sales, if the un-deducted input VAT is less than 200 million VND, the business entity is not eligible for monthly VAT refunds. If the un-deducted input VAT reaches 200 million VND or more, the business entity is eligible for monthly VAT refunds.

The objects eligible for VAT refunds in certain export cases are as follows: For entrusted exports, it is the entity entrusting the export; for processing exports on consignment, it is the entity accepting the processing contract directly with the foreign party; for subcontracted processing exports, it is the entity signing the processing export contract with the foreign party; for exported goods for overseas construction projects, it is the enterprise exporting goods and materials for overseas construction projects.

5. Business entities settling taxes when dividing, splitting, dissolving, bankrupting, or changing ownership; transferring, selling, contracting, leasing state-owned enterprises, if there is un-deducted input VAT or overpaid VAT.

6. Refunding VAT for programs and projects using official development assistance (ODA) non-reimbursable funds or non-reimbursable aid:

6.1. For projects using non-reimbursable ODA funds: the program or project sponsor, main contractor, or organization designated by the foreign funding agency to manage the program or project is eligible to be refunded the VAT paid for goods and services purchased in Vietnam for use in the program or project.

6.2. An organization in Vietnam using humanitarian aid funds from foreign organizations or individuals to purchase goods and services for non-repayable aid programs and humanitarian assistance projects in Vietnam shall be entitled to a refund of the VAT already paid on such goods and services.

Example 25: The Red Cross Society receives international organization funding amounting to 200 million VND to purchase humanitarian aid goods for people affected by natural disasters in certain provinces. The value of the purchased goods before tax is 200 million VND, with VAT being 20 million VND. According to regulations, the Red Cross Society will be entitled to a refund of 20 million VND.

The refund of VAT already paid for programs and projects utilizing official development assistance (ODA) non-repayable funds shall be carried out in accordance with the guidance of the Ministry of Finance.

7. Foreign diplomatic personnel eligible for diplomatic privileges and immunities under the Ordinance on Diplomatic Privileges and Immunities who purchase goods and services in Vietnam for their own use shall be entitled to a refund of the VAT recorded on the VAT invoice or payment voucher indicating the price including VAT.

8. A business entity must have a decision on tax refund issued by the competent authority as stipulated by law.

Business establishments and organizations eligible for VAT refunds according to the guidelines set forth in Points 1, 2, 3, 4, 5, 6, and 8 of this Section must be businesses subject to the tax deduction method, having been issued a business registration certificate or investment permit (professional practice permit); possessing a seal in compliance with legal provisions, maintaining accounting books and vouchers in accordance with legal accounting regulations; and holding a bank account under the taxpayer identification number of the business establishment.

In cases where a business establishment has submitted a tax refund application, it shall not transfer the input VAT proposed for refund into the deductible VAT amount of the following month.

D. PLACE OF TAX PAYMENT

Taxpayers declare and pay VAT at the locality where they conduct production and business operations. The declaration and payment of VAT shall be carried out in accordance with the Law on Tax Administration and its implementing regulations.

For specific cases, the procedures for tax declaration, payment of VAT, and circulation of documents are as follows:

1. Taxpayers declaring and paying VAT under the tax deduction method with dependent production bases (including processing and assembly bases) located in different provinces or centrally-administered municipalities from the main office's location must pay VAT at both the locality where the production base is located and the locality where the main office is located.

Dependent production bases that maintain accounting records must register to pay VAT under the tax deduction method at the locality where the production takes place. When selling finished products or semi-finished products, including sales to the main office, VAT invoices must be used as the basis for tax declaration and payment at the locality where the production takes place.

In cases where dependent production bases do not maintain accounting records, the taxpayer at the main office must pay VAT at a rate of 2% (for goods subject to a 10% VAT rate) or 1% (for goods subject to a 5% VAT rate) based on the turnover excluding VAT of the products produced or similar products at the locality where the production base is located. The VAT paid by the taxpayer to the dependent production base can be deducted from the VAT payable by the taxpayer at the locality where the main office is located.

Example 26: Enterprise A, headquartered in Ho Chi Minh City, has a dependent production base in Ba Ria-Vung Tau producing goods subject to a 10% VAT rate. The products are sold by the headquarters. Therefore, each month, Enterprise A is responsible for declaring and paying VAT for the dependent production base at a rate of 2% based on the turnover excluding VAT of the goods produced by the dependent production base in Ba Ria-Vung Tau. The VAT paid to the dependent production base can be deducted from the VAT payable by Enterprise A in Ho Chi Minh City.

2. Procedures for the circulation of documents between the Treasury and tax authorities

Taxpayers pay VAT generated at the location of their main office to the State Treasury at the same level as the tax authority where they have registered for tax declaration, while simultaneously paying VAT at a percentage rate to dependent production bases located in different provinces or centrally-administered municipalities from the main office's location. Payment vouchers must be prepared separately for each State Treasury, clearly indicating the government revenue accounts of the localities where the revenue is generated.

If taxpayers pay cash at the State Treasury at the location of their main office, the State Treasury will transfer the money and government revenue vouchers to the relevant State Treasury to record government revenue for the VAT portion of the dependent production base.

E. IMPLEMENTATION ORGANIZATION

I. ORGANIZATION OF VAT COLLECTION

1. The Tax Authority is responsible for organizing and managing VAT collection and VAT refunds for business establishments.

2. The Customs Authority is responsible for organizing and managing VAT collection on imported goods.

II. EFFECTIVE DATE OF IMPLEMENTATION

1. This Circular shall take effect 15 days after its publication in the Official Gazette and shall apply from January 1, 2009, replacing Circulars No. 32/2007/TT-BTC dated April 9, 2007, and Circular No. 30/2008/TT-BTC dated April 16, 2008, of the Ministry of Finance.

2. Shipbuilding enterprises with shipbuilding contracts signed with customers before the effective date of this Circular at a price including a 5% VAT rate but not completed, accepted, and delivered by December 31, 2008, shall continue to apply the 5% VAT rate for these contracts. Shipbuilding enterprises must submit a written report to the directly managing tax authority listing ongoing shipbuilding contracts transferred to 2009 along with copies of the contracts before March 31, 2009.

During implementation, if there are difficulties or obstacles, units and business establishments are advised to promptly report them to the Ministry of Finance for timely resolution./.