Law on Value Added Tax No. 13/2008/QH12

LAW

Value-added tax (VAT)

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BASED ON THE CONSTITUTION OF THE SOCIALIST REPUBLIC OF VIETNAM IN 1992 AS AMENDED AND COMPLEMENTED BY RESOLUTION NO. 51/2001/QH10;

The National Assembly enacts the Value Added Tax Law,

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Law stipulates the taxable objects, non-taxable objects, taxpayers, tax bases and methods of calculation, deduction and refund of value added tax.

Article 2. Value-added tax (VAT)

Value added tax is a tax levied on the value added of goods and services generated from production, circulation to consumption.

Article 3. Taxable objects

Goods and services used for production, business, and consumption in Vietnam are taxable objects of value added tax, except for those specified in Article 5 of this Law.

Article 4. Taxpayers

The payers of value added tax are organizations and individuals producing and trading taxable goods and services (hereinafter referred to as business entities) and organizations and individuals importing taxable goods (hereinafter referred to as importers).

Article 5. Non-Taxable Objects

1. Agricultural products, livestock products, aquaculture products, and fishing products that have not been processed into other products or only undergone simple processing by organizations and individuals who produce and sell them and at the import stage.

2. Products are animal breeding materials, plant breeding materials, including breeding eggs, breeding animals, seedlings, seeds, semen, embryos, genetic materials.

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.

5. State-owned housing sold by the state to tenants.

6. Transfer of land use rights.

7. Life insurance, student insurance, pet insurance, crop insurance, and reinsurance.

8. Credit service; securities trading; capital transfer; financial services arising therefrom, including interest rate swaps, forward contracts, futures contracts, call and put options on foreign currencies, and other financial services arising therefrom as prescribed by law.

9. Medical services, veterinary services, including medical examination, treatment, and prevention services for humans and pets.

10. Postal, public telecommunications, and Internet普及服务根据政府计划。

11. Public service activities related to sanitation, street drainage, and residential area drainage; maintaining zoos, flower gardens, parks, street greenery, public lighting; funeral services.

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

13. Teaching and vocational training as prescribed by law.

14. Broadcasting radio and television using state budget funds.

15. Publishing, importing, distributing newspapers, magazines, specialized newsletters, political books, textbooks, teaching materials, legal texts, science and technology books, books printed in ethnic minority scripts, and propaganda posters, including those in tape or disc form with recorded sound, video, and electronic data; printing money.

16. Public passenger transportation by bus and electric vehicle.

17. Machinery, equipment, and materials that are not yet domestically produced and need to be imported for direct use in scientific research and technological development activities; machinery, equipment, spare parts, special-purpose transport vehicles, and materials that are not yet domestically produced and need to be imported for exploration, development of oil and gas fields; aircraft, drilling platforms, ships that are not yet domestically produced and need to be imported as fixed assets of enterprises, leased from abroad for production and business operations and for leasing.

18. Special-purpose weapons and equipment for national defense and security.

19. Goods imported under humanitarian aid and non-reimbursable aid; gifts given to state agencies, political organizations, social-political organizations, occupational social-political organizations, social organizations, occupational social organizations, and civilian armed units; gifts given to individuals in Vietnam according to the government's regulations; items of foreign organizations and individuals according to diplomatic exemption standards; goods carried by individuals within the tax-free baggage allowance.

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

20. Goods in transit through Vietnam's territory; temporarily imported goods for re-export; temporarily exported goods for re-import; raw materials imported for production and processing of export goods under production contracts signed with foreign parties; goods and services traded between overseas and non-tariff zones and between non-tariff zones.

21. Technology transfer as prescribed by the Technology Transfer Law; transfer of intellectual property rights as prescribed by the Intellectual Property Law; computer software.

22. Imported gold bars and ingots that have not been crafted into decorative or jewelry products or other products.

23. Exported products are unprocessed natural resources and minerals as prescribed by the government.

24. Artificial products used to replace human body parts; crutches, wheelchairs, and other special-use devices for disabled persons.

25. Goods and services of individual traders whose average monthly income is lower than the general minimum wage applicable to domestic organizations and businesses.

Business entities providing goods and services exempt from value added tax as stipulated in this Article shall not be entitled to deduct and refund input VAT, except in cases where the zero percent tax rate prescribed in Clause 1 of Article 8 of this Law is applied.

Chapter II

BASIS AND METHOD OF CALCULATING TAX

Article 6. Basis for calculating tax

The basis for calculating value-added tax is the taxable price and tax rate.

Article 7. Taxable Price

1. The taxable price is defined as follows:

a) For goods and services sold by production and trading entities, the selling price does not include value added tax. For goods and services subject to special consumption tax, the selling price includes special consumption tax but excludes value added tax;

b) For imported goods, it is the customs entry price plus import duties (if any) and special consumption taxes (if any). The customs entry price is determined according to the provisions on the taxable price of imported goods.

c) For goods and services used for exchange, internal consumption, or gifts, it is the taxable value of similar or equivalent goods and services at the time these activities occur;

d) For asset rental activities, it is the rental fee excluding value added tax;

In cases where rental fees are paid periodically or prepaid for a rental period, the taxable value is the rental fee paid per period or prepaid for the rental period excluding value added tax;

In cases where foreign-made machinery, equipment, and transport vehicles that are not domestically produced are rented and then sublet, the taxable value is reduced by the rental fee payable to the foreign party.

đ) For goods sold under installment or deferred payment terms, it is the selling price for a lump sum payment excluding value-added tax, excluding the interest on installments or deferred payments;

e) For processing goods, it is the processing price excluding value-added tax;

g) For construction and installation activities, it is the value of the project, sub-project, or portion of work handed over excluding value-added tax. In cases where construction and installation do not include materials, machinery, and equipment in the tender, the taxable price is the construction and installation value excluding the value of materials and machinery;

h) For real estate business activities, it is the selling price of real estate excluding value-added tax, except for the transfer price of land use rights or land rental fees payable to the state budget;

i) For agency and brokerage activities in buying and selling goods and services earning commission, it is the commission income from these activities excluding value-added tax;

k) For goods and services using payment vouchers indicating a price including value-added tax, the taxable price is determined according to the following formula:

2. The taxable price for goods and services specified in Clause 1 of this Article includes additional surcharges and fees collected by the business establishment.

3. The taxable price is determined in Vietnamese Dong. If the taxpayer's revenue is in foreign currency, it must be converted to Vietnamese Dong at the average inter-bank foreign exchange rate published by the State Bank of Vietnam at the time of revenue generation to determine the taxable price.

Article 8. Tax Rate

1. A zero percent tax rate applies to exported goods and services, international transportation, and goods and services exempt from value-added tax under Article 5 of this Law when exported, except for technology transfers, intellectual property transfers abroad; reinsurance services abroad; credit, capital transfer, and financial service transactions arising; postal and telecommunications services; unprocessed natural resources and minerals specified in Clause 23 of Article 5 of this Law.

2. The five percent tax rate applies to the following goods and services:

a) Clean water for production and daily use;

b) Fertilizers; ores for fertilizer production; pesticides and growth stimulants for livestock and crops;

c) Livestock and poultry feed and other animal feeds;

d) Excavation, dredging of canals, ditches, ponds, lakes for agricultural production; cultivation, care, pest control for crops; preliminary processing and preservation of agricultural products;

đ) Unprocessed agricultural products, livestock, and aquatic products, except those specified in Clause 1 of Article 5 of this Law;

e) Raw rubber; raw rosin; fishing nets, ropes, and threads;

g) Fresh food; unprocessed forest products, except wood, bamboo shoots, and products specified in Clause 1 of Article 5 of this Law;

h) Sugar; by-products in sugar production, including molasses, sugarcane residue, mud residue;

i) Products made from rush, straw, bamboo, palm leaves, rice straw, coconut husks, coir, duckweed, and other handicrafts produced from agricultural waste; raw cotton; newsprint;

k) Machinery and equipment specifically used for agricultural production, including plows, harrows, transplanters, seed drills, rice threshers, harvesters, combine harvesters, agricultural product harvesters, machines or sprayers for pesticide application;

l) Medical equipment, medical bandages, sanitary napkins; disease prevention and treatment drugs; pharmaceutical chemicals and medicinal herbs used as raw materials for drug production;

m) Teaching and learning aids, including models, drawings, boards, chalk, rulers, compasses, and specialized equipment and tools for teaching, research, and scientific experiments;

n) Cultural activities, exhibitions, physical education, sports; artistic performances, film production; import, distribution, and screening of films;

o) Children's toys; various types of books, except books specified in Clause 15 of Article 5 of this Law;

p) Scientific and technological services as prescribed by the Science and Technology Law.

3. A ten percent tax rate applies to goods and services not specified in Clauses 1 and 2 of this Article.

Article 9. Methods of calculating value-added tax

The methods of calculating value-added tax include the deduction method and the direct calculation method on value-added.

Article 10. Deduction Method

1. The method for deducting value-added tax is prescribed as follows:

a) The amount of value-added tax payable under the tax deduction method equals the output value-added tax minus the deductible input value-added tax.

b) The output value-added tax amount is equal to the total value-added tax amount recorded on the value-added tax invoice for goods and services sold.

c) The deductible input value-added tax amount is equal to the total value-added tax amount recorded on the value-added tax invoices for purchased goods and services, import value-added tax payment certificates, and meets the conditions stipulated in Article 12 of this Law.

2. The deduction method applies to businesses that fully comply with accounting records, invoices, and documents as prescribed by laws on accounting, invoices, and documents, and have registered to pay taxes using the deduction method.

Article 11. Direct Calculation Method on Value-Added

1. The direct calculation method on value-added is defined as follows:

a) The value-added tax payable under the direct calculation method on value-added is calculated by multiplying the value-added of goods and services sold by the value-added tax rate.

b) Value-added is determined by subtracting the purchase price of goods and services from the selling price of goods and services.

2. The direct calculation method on value-added applies to the following cases:

a) Businesses and foreign organizations and individuals conducting business without a permanent establishment in Vietnam but generating income within Vietnam who have not fully complied with accounting records, invoices, and documents.

b) Gold, silver, and precious stone trading activities.

Chapter III

DEDUCTION AND REFUND OF TAX

Article 12. Deduction of Input Value-Added Tax

1. Businesses subject to value-added tax under the tax deduction method shall deduct input value-added tax as follows:

a) Input value-added tax of goods and services used for producing and trading taxable goods and services can be deducted in full.

b) Input value-added tax of goods and services used simultaneously for producing and trading taxable and non-taxable goods and services can only be deducted for the portion used for producing and trading taxable goods and services. In the case of fixed assets used simultaneously for producing and trading taxable and non-taxable goods and services, the input value-added tax can be deducted in full.

c) Input value-added tax of goods and services sold to organizations and individuals using humanitarian aid funds or non-repayable aid funds can be deducted in full.

d) Input value-added tax arising in a month can be declared and deducted when determining the tax payable for that month. If a business discovers errors in the declaration and deduction of input value-added tax, they may declare and supplement the deduction; the maximum time for declaring and supplementing is six months from the date of the error.

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

a) Having a value-added tax invoice for purchasing goods and services or an import tax payment certificate.

b) Having a bank payment receipt for purchased goods and services, except for goods and services purchased individually with a value below twenty million dong.

c) For exported goods and services, in addition to the conditions specified in points a and b of this clause, there must be an export contract signed with external parties regarding the sale, processing of goods, provision of services, sales invoices, bank payment receipts, and customs declarations for exported goods.

Payment for exported goods and services through offsetting between exported goods and services and imported goods and services, or paying off state debts, is considered as bank payment.

Article 13. Cases for Refund of Value Added Tax

1. A business subject to value added tax under the deduction method shall be entitled to a refund of value added tax if it has not fully deducted input value added tax for three consecutive months or more.

In cases where a business that has registered to pay value added tax under the deduction method has a new investment project, during the investment phase, with input value added tax on goods and services purchased for the investor that have not been fully deducted and the remaining tax amount is two hundred million dong or more, such business shall be entitled to a refund of value added tax.

2. A business that exports goods and services in a month and has not fully deducted input value added tax from two hundred million dong or more shall be entitled to a monthly refund of value added tax.

3. A business subject to value added tax under the deduction method shall be entitled to a refund of value added tax when transferring ownership, converting a business, merging, consolidating, splitting, dissolving, going bankrupt, or ceasing operations, provided there is excess paid value added tax or un-deducted input value added tax.

4. A business shall be entitled to a refund of value added tax based on a decision by an authorized agency in accordance with the law and in cases of value added tax refunds pursuant to international treaties to which the Socialist Republic of Vietnam is a party.

Article 14. Invoices and Documents

1. Sales transactions of goods and services must be accompanied by invoices and documents in accordance with the law and the following provisions:

a) Businesses subject to value added tax under the deduction method shall use value added tax invoices; these invoices must be fully and accurately filled out in accordance with the prescribed content, including any additional surcharges or fees (if applicable). In cases where goods or services subject to value added tax are sold without the value added tax amount being recorded on the value added tax invoice, the output value added tax shall be determined by multiplying the payment price recorded on the invoice by the value added tax rate, except as provided in Clause 2 of this Article;

b) Businesses subject to value added tax under the direct calculation method on value added tax shall use sales invoices.

2. For pre-printed tickets and vouchers that serve as payment receipts with fixed prices, the payment price of those tickets and vouchers already includes value added tax.

Chapter IV

IMPLEMENTING PROVISIONS

Article 15. Effective Date

1. This Law takes effect from January 1, 2009.

2. This Law replaces the following laws:

a) The Law on Value Added Tax 1997;

b) The Law Amending and Supplementing Certain Provisions of the Law on Value Added Tax No. 07/2003/QH11;

3. The second Article of the Law Amending and Supplementing Certain Provisions of the Special Consumption Tax Law and the Law on Value Added Tax No. 57/2005/QH11 is repealed.

Article 16. Guidance on Implementation

The Government shall provide detailed regulations and guidance on implementing Articles 5, 7, 8, 12, 13, and other necessary contents of this Law according to management requirements.

This Law was passed by the National Assembly of the Socialist Republic of Vietnam, the twelfth session, third meeting, on June 3, 2008./.