Decree No. 209/2013/ND-CP detailing and guiding the implementation of certain provisions of the Value Added Tax Law

DECREE

Regulations detailing and guiding the implementation of certain provisions of the Value Added Tax Law

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Pursuant to the Law on Organization of the Government dated December 25, 2001;

Based on the Value Added Tax Law dated June 3, 2008;

Based on the Law Amending and Supplementing Certain Provisions of the Value Added Tax Law dated June 19, 2013;

At the proposal of the Minister of Finance;

The Government promulgates this Decree to detail and guide the implementation of certain provisions of the Value Added Tax Law,

Chapter I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Decree details and guides the implementation of certain provisions of the Value Added Tax Law and the Law Amending and Supplementing Certain Provisions of the Value Added Tax Law regarding taxpayers, tax-exempt objects, taxable value, tax rates, methods of calculating tax, tax deduction, tax refund, and place of tax payment.

Article 2. Taxpayer

1. A taxpayer of value added tax is an organization or individual engaged in production and business of goods and services subject to value added tax (hereinafter referred to as a business entity) and an organization or individual importing goods subject to value added tax (hereinafter referred to as an importer).

2. An organization or individual engaged in production and business in Vietnam purchasing services (including cases where services are attached to goods) from an organization outside Vietnam without a permanent establishment in Vietnam, or an individual outside Vietnam who is a non-resident, shall be the taxpayer unless they are not required to declare and pay value added tax as provided for in Point b Clause 3 of this Article.

The provisions concerning permanent establishments and individuals outside Vietnam as non-residents in this Clause shall be implemented in accordance with the laws on corporate income tax and personal income tax.

3. Cases not required to declare and pay value added tax:

a) Organizations and individuals receiving compensation payments, bonuses, support funds, transfer prices for emission rights, and other financial receipts.

b) Organizations and individuals engaged in production and business in Vietnam purchasing services from organizations outside Vietnam without a permanent establishment in Vietnam, or individuals outside Vietnam who are non-residents, including cases such as: Repairing means of transportation, machinery, equipment (including spare parts and replacement materials); advertising, marketing; investment promotion and trade; brokerage for selling goods and providing services; training; sharing international postal and telecommunications service fees between Vietnam and foreign countries where these services are performed outside Vietnam.

c) Organizations and individuals not engaged in business and not being taxpayers of value added tax selling assets.

d) Organizations and individuals transferring investment projects to produce and sell goods and services subject to value added tax to enterprises and cooperatives.

đ) Agricultural products, livestock, aquatic products that have not been processed into other products or only undergone simple processing such as cleaning, drying, peeling, shelling, cutting, salting, cold storage, and other common preservation methods when sold to enterprises and cooperatives, except as provided for in Clause 1 Article 5 of the Value Added Tax Law.

The Ministry of Finance shall provide detailed guidance on the provisions of Clauses 2 and 3 of this Article.

1. For imported goods exempt from special consumption tax as specified in Point a, Clause 2, Article 3 of the Special Consumption Tax Law, including:

Tax-exempt objects shall be implemented in accordance with the provisions of Article 5 of the Value Added Tax Law and Clause 1 Article 1 of the Law Amending and Supplementing Certain Provisions of the Value Added Tax Law.

1. For products specified in Clause 1 Article 5 of the Value Added Tax Law that undergo simple processing, the new product must be cleaned, dried, peeled, shelled, cut, salted, cold-stored, and preserved in other common ways.

2. Some services specified in Clause 8 Article 5 of the Value Added Tax Law and Clause 1 Article 1 of the Law Amending and Supplementing Certain Provisions of the Value Added Tax Law are defined as follows:

a) Credit services include the following forms:

- Lending;

- Discounting, rediscounting transferable instruments and other securities;

- Guarantee;

- Financial leasing;

- Issuing credit cards;

- Domestic factoring; international factoring;

- Sale of collateral assets for loans;

- Provision of credit information in accordance with the Law on State Bank;

- Other forms of credit provision as prescribed by law.

b) Loan services of taxpayers who are not credit institutions;

c) Securities trading includes: Securities brokerage, proprietary securities trading, underwriting securities issuance, securities investment advisory, securities custody, management of securities investment funds, management of securities investment companies, portfolio management of securities, market organization services of stock exchanges or securities trading centers, services related to securities registered and custodied at the Vietnam Securities Depository Center, lending money to customers for margin trading, advance payment for selling securities, and other securities trading activities as prescribed by law.

d) Capital transfer includes transferring part or all of the invested capital, including selling a business to another business for production and business purposes, transferring securities, transferring capital contribution rights, and other forms of capital transfer as prescribed by law.

đ) Sale of debt.

e) Foreign exchange trading.

g) Sale of collateral assets of organizations wholly owned by the State with 100% state-owned equity established by the Government to handle bad debts of Vietnamese credit institutions.

3. Medical examination and treatment services specified in Clause 9 Article 5 of the Value Added Tax Law include transportation, testing, imaging, blood, and blood products used for patients.

4. Services maintaining zoos, flower gardens, parks, street trees, public lighting, funeral services.

The Ministry of Finance shall provide detailed guidance on services not subject to taxation as specified in this Clause.

5. For maintenance, repair, and construction works specified in Clause 12 Article 5 of the Value Added Tax Law if using other sources of funding besides people's contributions (including contributions and sponsorships from organizations and individuals), humanitarian aid funds, and if other sources of funding do not exceed 50% of the total funding used for the project, then the tax-exempt object is the entire value of the project.

Social policy beneficiaries include: Persons with meritorious service as prescribed by the law on persons with meritorious service; social welfare recipients receiving assistance from the state budget; poor and near-poor households and other cases as prescribed by law.

6. Public passenger transportation as defined in Clause 16, Article 5 of the Value Added Tax Law includes public passenger transportation by bus and electric vehicles along routes within the province, within urban areas, and nearby provincial routes as prescribed by competent state authorities.

7. Aircraft as defined in Clause 17, Article 5 of the Value Added Tax Law and Clause 1, Article 1 of the Law amending and supplementing certain provisions of the Value Added Tax Law includes aircraft engines.

The Ministry of Planning and Investment shall take the lead and coordinate with relevant agencies to promulish a list of machinery, equipment, spare parts, and materials that have been domestically produced to distinguish from those not yet domestically produced and need to be imported for direct use in scientific research and technological development activities; a list of machinery, equipment, replacement parts, specialized transport means, and materials that have been domestically produced to distinguish from those not yet domestically produced and need to be imported to conduct exploration, exploitation activities of oil and gas fields; a list of aircraft, drilling platforms, and ships that have been domestically produced to distinguish from those not yet domestically produced and need to be imported to form fixed assets of enterprises, leased from abroad for production and business purposes, leasing, and subleasing.

8. Specialized weapons and equipment for national defense and security as defined in Clause 18, Article 5 of the Value Added Tax Law shall be specifically regulated by the Ministry of Defense and the Ministry of Public Security, in coordination with the Ministry of Finance.

9. Imported goods as defined in Clause 19, Article 5 of the Value Added Tax Law are specifically defined as follows:

a) For humanitarian aid and non-reimbursable aid imports, approval by a competent state authority is required.

b) For gifts to state agencies, political organizations, socio-political organizations, occupational socio-political organizations, social organizations, occupational social organizations, and people's armed forces units, regulations on gift-giving and receiving under the law shall apply.

c) The quota for imported goods as gifts or presents to individuals in Vietnam shall be implemented according to the regulations on gift-giving and receiving under the law.

d) Personal items of foreign organizations and individuals exempted under diplomatic standards; goods carried by persons within tax-free baggage allowances.

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

10. In cases of technology transfer and intellectual property rights transfer as stipulated in Clause 21, Article 5 of the Value Added Tax Law, if accompanied by the transfer of machinery and equipment, the taxable value added tax will be calculated only on the transferred technology and intellectual property rights; if it is not possible to separate them, the value added tax will be calculated on both the transferred technology, intellectual property rights, and machinery and equipment.

11. Export products are natural resources and minerals extracted without further processing into other products.

The Ministry of Finance shall take the lead and coordinate with relevant agencies to provide specific guidance on determining natural resources and minerals extracted without further processing into other products as stipulated in this clause.

12. Goods and services of households and individuals engaged in business with annual revenue of up to one hundred million dong.

The Ministry of Finance shall guide households and individuals engaged in business with annual revenue of up to one hundred million dong not subject to value added tax as stipulated in this clause.

Chapter II

BASIS AND METHOD OF CALCULATING TAX

Article 4. Taxable Price

The tax calculation price shall be implemented according to Article 7 of the Value Added Tax Law and Clause 2, Article 1 of the Law amending and supplementing certain provisions of the Value Added Tax Law.

1. For goods and services sold by production and business establishments, the selling price before value added tax; for goods and services subject to special consumption tax, the selling price including special consumption tax but excluding value added tax; for goods subject to environmental protection tax, the selling price including environmental protection tax but excluding value added tax; for goods subject to both special consumption tax and environmental protection tax, the selling price including both special consumption tax and environmental protection tax but excluding value added tax.

For imported goods, the price at the customs port plus (+) import duties (if applicable), plus (+) special consumption tax (if applicable), and plus (+) environmental protection tax (if applicable). The price at the customs port is determined according to the regulations on the tax calculation price for imported goods.

For the case of purchasing services as stipulated in Clause 2, Article 2 of this Decree, the tax calculation price is the payment price recorded in the service purchase contract before value added tax.

2. For goods and services used for exchange, internal consumption, gifts, donations, or free provision, the tax calculation price is the value of similar goods and services at the time of exchange, internal consumption, gifts, donations, or free provision. Specifically, for free invitations (without charge) to art performances, fashion shows, beauty pageants, and sports competitions approved by competent state authorities according to the law, the tax calculation price is zero (0).

For goods and services used for promotions as prescribed by the law on trade, the tax calculation price is zero (0); in cases where goods and services used for promotions are not conducted in accordance with the law on trade, they must be declared and taxed as goods and services used for internal consumption, gifts, donations, or free provision.

Goods and services for internal consumption as defined in this clause are those provided by businesses for their own use, excluding those used to continue the production and business process of the enterprise.

3. For real estate transfer activities, the tax calculation price for value added tax is the transfer price of the real estate minus (-) the land price deductible for value added tax.

a.1) In cases where the State grants land for infrastructure investment to build houses for sale, the land price deductible for value added tax includes the land use fee payable to the state budget according to the law on collecting land use fees and compensation and clearance costs (if any).

- In cases where the State assigns land for investment in infrastructure to build houses for sale, the land price deducted for calculating value-added tax includes the land use fee payable to the state budget (excluding exempted and reduced land use fees) and compensation costs for land clearance according to the provisions of the law;

- In cases of auctioning land use rights, the land price deducted for calculating value-added tax is the winning bid price of the land;

- In cases of leasing land to build infrastructure and houses for sale, the land price deducted for calculating value-added tax is the lease payment payable to the state budget (excluding exempted and reduced lease payments) and compensation costs for land clearance according to the provisions of the law;

- In cases where a business entity receives the transfer of land use rights from organizations or individuals, the land price deducted for calculating value-added tax is the land price at the time of receiving the transfer of land use rights including the value of infrastructure (if any); the business entity shall not declare and deduct input value-added tax on infrastructure already included in the land use right price that is exempt from value-added tax. If the land price deducted does not include the value of infrastructure, the business entity may declare and deduct input value-added tax on infrastructure not yet included in the land use right price that is exempt from value-added tax;

In cases where the land price at the time of receiving the transfer cannot be determined, the land price deducted for calculating value-added tax is the land price stipulated by the People's Committee of the province or centrally administered city at the time of signing the contract for the transfer of land use rights;

- In cases where real estate businesses operate under the build-transfer (BT) model with payment in the form of land use rights, the land price deducted for calculating value-added tax is the price at the time of signing the BT contract according to the provisions of the law; if the price cannot be determined at the time of signing the BT contract, the land price deducted is the price decided by the provincial People's Committee for payment of the project;

b) In cases of building and operating infrastructure, constructing houses for sale, transferring or leasing, the value-added tax taxable amount is the total revenue received according to the project implementation progress or the payment schedule recorded in the contract minus (-) the corresponding land price deducted based on the percentage of revenue received over the total contract value;

4. For electricity from hydropower plants accounted for as dependent units of Vietnam Electricity Corporation, including electricity from hydropower plants accounted for as dependent units of power generation corporations under Vietnam Electricity Corporation, the value-added tax taxable amount to determine the local value-added tax payable is calculated as 60% of the average annual retail electricity price in the previous year excluding value-added tax;

5. For casino services, electronic games with prizes, and entertainment activities with wagers, it is the total revenue from these activities including special consumption tax minus the amounts paid out as prizes to customers;

6. The value-added tax taxable amount for goods and services specified in Clause 1 Article 7 of the Law on Value-Added Tax and Clause 2 Article 1 of the Law Amending and Supplementing Certain Provisions of the Law on Value-Added Tax includes additional surcharges and fees that the business entity enjoys;

The Ministry of Finance shall provide detailed guidance on the taxable value specified in this Article.

Article 5. Time for Determining Value Added Tax

1. The time for determining value added tax on goods is the time when ownership or usage rights of the goods are transferred to the buyer, regardless of whether payment has been received or not.

2. The time for determining value added tax on services is the time when the provision of services is completed or the invoice for providing services is issued, regardless of whether payment has been received or not.

3. The Ministry of Finance shall provide specific guidance on the time for determining value added tax for certain special cases.

Article 6. Tax Rate

The rate of value added tax shall be implemented according to the provisions of Article 8 of the Law on Value Added Tax and Clause 3, Article 1 of the Law amending and supplementing some articles of the Law on Value Added Tax.

1. The zero percent tax rate applies to exported goods and services, international transportation, goods and services exempt from value added tax as stipulated in Article 5 of the Law on Value Added Tax and Clause 1, Article 1 of the Law amending and supplementing some articles of the Law on Value Added Tax when exported, except for goods and services specified in Subpoint d of this Clause.

Exported goods and services are goods and services sold and provided to organizations and individuals outside Vietnam and consumed outside Vietnam, within non-tariff zones; goods and services provided to foreign customers in accordance with the law.

a) For exported goods, it includes: Goods exported abroad, sold into non-tariff zones; construction and installation projects outside Vietnam, within non-tariff zones; goods sold where the point of delivery and receipt of goods is outside Vietnam; spare parts and replacement materials for repairing and maintaining foreign-owned means of transport, machinery, and equipment for consumption outside Vietnam; exportation at the place of production and other cases considered as exports under the law.

b) For exported services, it includes services directly supplied to organizations and individuals outside Vietnam or within non-tariff zones and consumed outside Vietnam, within non-tariff zones.

In cases where service provision involves activities taking place both inside and outside Vietnam but the service contract is signed between two taxpayers in Vietnam or has a permanent establishment in Vietnam, the zero percent tax rate only applies to the value of services performed outside Vietnam, except for insurance services for imported goods which apply the zero percent tax rate to the entire contract value. If the contract does not separately specify the value of services performed in Vietnam, the taxable amount is determined based on the percentage of costs incurred in Vietnam over total costs.

Foreign individuals are foreigners who do not reside in Vietnam, Vietnamese citizens residing abroad, and those outside Vietnam during the period of service provision.

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

c) International transportation as stipulated in this Clause includes passenger, luggage, and cargo transportation along international routes from Vietnam to abroad or from abroad to Vietnam, or both departure and arrival points being outside Vietnam. If an international transportation contract includes domestic transportation legs, international transportation includes the domestic leg.

d) Exported goods and services as stipulated in Subpoints a and b of this Clause must meet the conditions prescribed in Subpoint c, Clause 2, Article 9 of this Decree and other goods and services applying the zero percent tax rate under conditions prescribed by the Ministry of Finance.

đ) Cases not applying the zero percent value added tax rate include:

- Technology transfer, intellectual property rights transfer abroad;

- Reinsurance services provided abroad;

- Credit services provided abroad;

- Capital transfer abroad;

- Foreign securities investment;

- Derivative financial services;

- Postal and telecommunications services;

- Export products that are raw materials and minerals extracted without further processing as stipulated in Clause 11, Article 3 of this Decree;

- Goods and services provided to individuals not registered for business in non-tariff zones.

e) The Ministry of Finance shall specify certain cases of goods and services provided to organizations and individuals outside Vietnam that apply the zero percent tax rate and goods and services provided to foreign organizations and individuals but consumed in Vietnam that do not apply the zero percent tax rate.

2. The five percent tax rate applies to goods and services as stipulated in Clause 2, Article 8 of the Law on Value Added Tax and Clause 3, Article 1 of the Law amending and supplementing some articles of the Law on Value Added Tax. Specific cases applying the five percent tax rate are as follows:

a) Clean water for production and daily use as stipulated in Subpoint a, Clause 2, Article 8 of the Law on Value Added Tax does not include bottled or canned drinking water and other beverages subject to the ten percent tax rate.

b) Products as stipulated in Subpoint b, Clause 2, Article 8 of the Law on Value Added Tax include:

- Fertilizers are organic, inorganic, microbial fertilizers, and other types of fertilizers;

- Ores for fertilizer production are raw materials for producing fertilizers;

- Pesticides include plant protection chemicals and other types of pesticides;

- Growth stimulants for livestock and crops.

c) Livestock and poultry feed and other animal feed as stipulated in Subpoint c, Clause 2, Article 8 of the Law on Value Added Tax include processed or unprocessed products such as bran, oil cakes, fish meal, bone meal.

đ) Primary processing and preservation services as stipulated in Subpoint d, Clause 2, Article 8 of the Law on Value Added Tax include: Drying, sun-drying, peeling, shelling, slicing, grinding, cold storage, salting, and other common preservation methods.

đ) Fresh food as stipulated in Subpoint g, Clause 2, Article 8 of the Law on Value Added Tax includes food items that have not been cooked or processed into other products.

Unprocessed forest products as stipulated in Subpoint g, Clause 2, Article 8 of the Law on Value Added Tax include natural forest products belonging to the groups: Song, bamboo, rattan, reed, mushrooms, wood ear fungus, roots, leaves, flowers, medicinal plants, tree sap, and other forest products.

e) Chemical drugs and medicinal herbs as raw materials for producing medicines and preventive medicines as stipulated in Subpoint 1, Clause 2, Article 8 of the Law on Value Added Tax.

g) Social housing as defined in Point q Clause 2 Article 8 of the Law on Value Added Tax and Clause 3 Article 1 of the Law amending and supplementing certain provisions of the Law on Value Added Tax is housing constructed by the State or organizations and individuals belonging to various economic sectors, and meeting criteria for social housing regarding price, rental price, lease-purchase price, and eligible buyers and conditions for purchasing, renting, or lease-purchasing social housing as stipulated by laws on housing.

Article 7. Method of tax deduction

The method of tax deduction shall be implemented in accordance with Article 10 of the Law on Value Added Tax and Clause 4 Article 1 of the Law amending and supplementing certain provisions of the Law on Value Added Tax.

1. 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.

2. The output value added tax equals the total value added tax of goods and services sold recorded on the value added tax invoice.

The value added tax recorded on the value added tax invoice is calculated by multiplying (x) the taxable value of the goods and services subject to tax by the applicable rate of value added tax.

In cases where payment invoices record the payment price including value added tax, the output value added tax is determined by subtracting (-) the taxable value as prescribed in Point k Clause 1 Article 7 of the Law on Value Added Tax from the payment price.

3. The deductible input value added tax is determined based on:

a) The value added tax recorded on the value added tax invoice for purchasing goods and services; tax payment certificates for imported goods or tax payments for services as specified in Clause 2 Article 2 of this Decree.

In cases where goods and services purchased are recorded using payment invoices that include value added tax, the deductible input value added tax is determined by subtracting (-) the taxable value as prescribed in Point k Clause 1 Article 7 of the Law on Value Added Tax from the payment price.

b) Conditions for deducting input value added tax are carried out according to the provisions of Clause 2 Article 9 of this Decree.

4. The tax deduction method applies to:

a) Businesses currently operating with annual revenue of one billion dong or more from selling goods and providing services, and fully complying with accounting, invoices, and documents as required by laws on accounting, invoices, and documents, except for households and individuals engaged in business activities paying taxes under the direct calculation method as stipulated in Article 8 of this Decree.

The application period for a stable tax calculation method is two consecutive years.

The Ministry of Finance shall provide detailed guidance on calculating revenue to determine businesses paying value added tax under the tax deduction method and the application period for a stable tax calculation method as stipulated herein.

b) Businesses voluntarily applying the tax deduction method include:

- Enterprises and cooperatives currently operating with annual revenue of less than one billion dong from selling goods and providing services, and fully complying with accounting, books, invoices, and documents as required by laws on accounting, invoices, and documents;

- New enterprises established from investment projects of businesses currently operating under the tax deduction method for value added tax;

- Newly established enterprises and cooperatives conducting investments, purchasing fixed assets, machinery, equipment, foreign organizations, and foreign individuals engaging in business activities in Vietnam under contractor contracts or subcontractor contracts as guided by the Ministry of Finance;

- Other economic organizations capable of accounting for input and output value added tax.

c) Foreign organizations and individuals providing goods and services for exploration, development, and exploitation of oil and gas activities shall pay tax under the tax deduction method declared by the Vietnamese party to withhold and remit on their behalf.

In cases where businesses engage in buying, selling, and processing gold, silver, and precious stones, such businesses must separately account for these activities to pay tax under the direct calculation method on value added tax as prescribed in Clause 1 Article 8 of this Decree.

5. The Ministry of Finance shall provide specific guidance on the provisions of this Article.

Article 8. Direct Calculation Method on Value Added

The direct calculation method on value added shall be implemented in accordance with the provisions of Article 11 of the Law on Value Added Tax and Clause 5, Article 1 of the Law Amending and Supplementing Certain Provisions of the Law on Value Added Tax.

1. The amount of value added tax payable under the direct calculation method on value added is calculated by multiplying the value added by the 10% value added tax rate applicable to gold, silver, precious stones trading and processing activities.

The value added of gold, silver, and precious stones is determined by subtracting (-) the payment price of purchased gold, silver, and precious stones from the payment price of sold gold, silver, and precious stones.

The payment price of sold gold, silver, and precious stones is the actual selling price recorded on the sales invoice for gold, silver, and precious stones, including manufacturing fees (if any), value added tax, and additional surcharges and fees that the seller enjoys.

The payment price of purchased gold, silver, and precious stones is determined by the value of imported or purchased gold, silver, and precious stones, including value added tax used for the sale and processing of gold, silver, and precious stones.

In cases where negative value added (-) of gold, silver, and precious stones occurs during the tax period, it can be offset against positive value added (+) of gold, silver, and precious stones. If there is no positive value added (+) or if the positive value added (+) is insufficient to offset the negative value added (-), it may be carried forward to offset the value added of the following period within the year. At the end of the calendar year, any remaining negative value added (-) cannot be carried forward to the next year.

2. The amount of value added tax payable under the direct calculation method on value added is calculated by applying the percentage rate to revenue as follows:

a) Applicable subjects:

- Enterprises and cooperatives currently operating with annual revenue below the threshold of one billion VND, except those voluntarily opting to apply the tax deduction method as stipulated in Clause 4, Article 7 of this Decree;

- Newly established enterprises and cooperatives, except those voluntarily opting as stipulated in Clause 4, Article 7 of this Decree;

- Households and individuals engaged in business;

- Foreign organizations and individuals conducting business in Vietnam not in accordance with the Investment Law and other organizations not implementing or implementing inadequately accounting records, invoices, and receipts as prescribed by law, except foreign organizations and individuals providing goods and services for oil exploration, development, and exploitation activities as stipulated in Point c, Clause 4, Article 7 of this Decree;

- Other economic organizations, except those opting to pay taxes under the tax deduction method as stipulated in Point b, Clause 4, Article 7 of this Decree.

Where a business entity engages in gold, silver, and precious stones trading and processing activities, the business entity must separately account for these activities to pay taxes according to the direct calculation method on value added as specified in Clause 1 of this Article.

b) The percentage rate for calculating value added tax on revenue is specified for each activity as follows:

- Distribution, supply of goods: 1%;

- Services, construction excluding materials: 5%;

- Production, transportation, services attached to goods, construction including materials: 3%;

- Other business activities: 2%.

c) Revenue for calculating value added tax is the total amount of money from selling goods and services recorded on the sales invoice, including value added tax and additional surcharges and fees that the business entity enjoys.

3. Business activities and households not implementing or implementing inadequately accounting records, invoices, and receipts as prescribed by law shall pay value added tax under the turnover tax method as stipulated in Article 38 of the Law on Tax Administration.

The Ministry of Finance shall provide detailed guidance on the direct calculation method on value added as prescribed in this Article.

Chapter III

DEDUCTION AND REFUND OF TAX

Article 9. Input VAT Deduction

The deduction of input VAT shall be carried out in accordance with the provisions of Article 12 of the Value Added Tax Law and Clause 6 of Article 1 of the Law Amending and Supplementing Certain Provisions of the Value Added Tax Law.

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

a) Input VAT on goods and services used for producing and trading taxable goods and services shall be fully deducted, including input VAT on goods subject to value added tax that have been damaged and input VAT on goods and services forming fixed assets such as cafeterias, rest houses between shifts, changing rooms, parking lots, toilets, water tanks serving workers in production and business areas, and housing, medical stations for workers in industrial zones.

b) Input VAT on goods and services (including fixed assets) used simultaneously for producing and trading taxable and non-taxable goods and services shall only be deducted for the portion of input VAT on goods and services used for producing and trading taxable goods and services. Businesses must separately account for deductible input VAT and non-deductible input VAT; if separate accounting is not possible, the deductible input VAT shall be calculated based on the ratio (%) of sales subject to value added tax to total sales of goods and services.

For production and business establishments organizing closed-loop production and centralized accounting using products exempt from value added tax through various stages to produce taxable goods, the entire input VAT at each stage shall be fully deducted.

For production and business establishments implementing investment projects over multiple phases, including newly established production and business establishments, organizing closed-loop production and centralized accounting and using products exempt from value added tax to produce taxable goods, but providing goods and services exempt from value added tax during the basic construction phase, the entire input VAT during the investment phase to form fixed assets shall be fully deducted. Input VAT on goods and services not forming fixed assets shall be deducted based on the ratio (%) of sales subject to value added tax to total sales of goods and services.

For production and business establishments implementing investment projects, including newly established production and business establishments investing simultaneously in the production and trading of goods and services exempt from value added tax and taxable goods and services, the input VAT on fixed assets during the basic construction phase shall be temporarily deducted based on the ratio (%) of revenue from taxable goods and services to total revenue from goods and services sold according to the production and business plan of the business establishment. The temporarily deducted tax shall be adjusted based on the ratio (%) of revenue from taxable goods and services to total revenue from goods and services sold over three years starting from the first year with revenue.

The Ministry of Finance shall guide the determination of the ratio (%) of revenue from taxable goods and services to total revenue from goods and services sold and the temporary deduction and adjustment of input VAT as stipulated in this Point.

c) Input VAT on fixed assets, machinery, equipment, including input VAT on activities leasing these assets, machinery, and equipment, in the following cases shall not be deducted but included in the original cost of fixed assets or deductible expenses as prescribed by the Corporate Income Tax Law and guiding documents: Fixed assets specifically used for producing weapons, military equipment for national defense and security; fixed assets, machinery, and equipment of credit organizations, reinsurance enterprises, life insurance enterprises, securities trading enterprises, medical facilities, training institutions; civil aircraft, pleasure yachts not used for commercial cargo and passenger transport, tourism, and hotel operations.

For fixed assets being passenger cars with up to nine seats (excluding cars used for commercial cargo and passenger transport, tourism, and hotel operations) valued above 1.6 billion VND, the corresponding input VAT on the portion exceeding 1.6 billion VND shall not be deducted.

d) Input VAT on goods and services used for producing and trading goods and services exempt from value added tax shall not be deducted, except as provided in Points đ and e of this Subsection.

đ) Input VAT on goods and services purchased by businesses for producing and trading goods and services supplied to foreign organizations and international organizations for humanitarian aid and non-repayable assistance as stipulated in Clause 19 of Article 5 of the Value Added Tax Law shall be fully deducted.

e) Input VAT on goods and services used for exploration, development of oil and gas fields shall be fully deducted.

Input VAT arising in any month shall be declared and deducted when determining the tax payable for that month. If a business discovers errors in the declaration and deduction of input VAT, it may declare and deduct the additional amount before the tax authority announces the decision to inspect or audit the taxpayer at their place of business.

h) Input VAT on goods and services used for producing and trading goods and services not subject to value added tax as specified in Points a, d, and đ of Clause 3 of Article 2 of this Decree shall be fully deducted.

i) For the input value-added tax on purchases that cannot be deducted, the business entity shall record it as an expense for calculating corporate income tax or include it in the original cost of fixed assets, except for the input value-added tax of goods and services purchased individually with a value of twenty million dong or more without non-cash payment vouchers.

k) When a business entity switches from paying value-added tax based on the direct calculation method to the deduction method, it may deduct the value-added tax of goods and services purchased starting from the first period of declaration and payment under the deduction method.

When a business entity switches from paying value-added tax under the deduction method to the direct calculation method, it shall calculate the value-added tax of goods and services purchased during the period of paying under the deduction method but not yet deducted from deductible expenses when determining taxable income for corporate income tax, except for the value-added tax of goods and services purchased during the period of paying under the deduction method that has been refunded according to Article 10 of this Decree and other effective legal documents prior to the effective date of this Decree.

l) The Ministry of Finance shall specify certain cases where a business entity can declare and deduct value-added tax of goods and services purchased through authorization to another organization or individual, where the invoice is in the name of the authorized party.

2. Conditions for deducting input value-added tax:

a) Having a value-added tax invoice for purchased goods or services or a payment voucher for value-added tax on imported goods, and a payment voucher for value-added tax in the case of purchasing services as specified in Clause 2, Article 2 of this Decree.

b) Having a non-cash payment voucher for purchased goods or services, except for cases where the total value of purchased goods or services individually is less than twenty million dong.

For goods or services purchased on credit or installment payments with a value of twenty million dong or more, the business entity shall base its declaration and deduction of input value-added tax on the purchase contract, value-added tax invoice, and non-cash payment vouchers for the goods or services purchased on credit or installment payments. In cases where there is no non-cash payment voucher due to the payment time not having arrived according to the contract, the business entity still can declare and deduct input value-added tax. By the payment time stipulated in the contract or by December 31 each year if the payment time stipulated in the contract is earlier than December 31, if there is no non-cash payment voucher, the business entity will not be able to deduct input value-added tax and must declare and adjust the previously deducted input value-added tax.

Goods or services purchased through offsetting the value of purchased goods or services against the value of sold goods or services are also considered as non-cash payments; in cases where the remaining value after offsetting is paid in cash and is twenty million dong or more, only deductions are allowed if there is a non-cash payment voucher.

In cases where goods or services purchased from a single supplier have a value below twenty million dong but the total value of multiple purchases made on the same day reaches twenty million dong or more, only deductions are allowed if there is a non-cash payment voucher.

c) For exported goods or services subject to a zero percent tax rate, in addition to the conditions specified in Points a and b of this Clause, they must also meet the following conditions:

- Having a sales contract for export goods or processing contract for export goods, or a service supply contract with organizations or individuals abroad or within a free trade zone;

- Having non-cash payment vouchers for export goods or services and other required documents as prescribed by law; for exported goods, there must be a customs declaration form.

Exported goods or services paid for through offsetting against imported goods or services, or by settling debts on behalf of the State, are also considered as non-cash payments.

In cases where the foreign buyer loses the ability to pay due to bankruptcy; exported goods do not meet quality standards and must be destroyed at the importing country's border gate; and exported goods suffer losses due to objective reasons during transportation outside Vietnam's borders, third-party certificates replacing non-cash payment vouchers are also considered as non-cash payment vouchers.

The Ministry of Finance shall provide guidance on conditions for certain special cases of selling goods or providing services subject to a zero percent tax rate and substitute documents for non-cash payment vouchers.

Article 10. Refund of Value Added Tax (VAT)

The refund of VAT shall be carried out in accordance with the provisions of Article 13 of the Law on Value Added Tax and Clause 7 of Article 1 of the Law amending and supplementing certain articles of the Law on Value Added Tax.

1. A business subject to VAT under the tax deduction method, if there is an undeducted input VAT amount in the month (for monthly declaration cases) or quarter (for quarterly declaration cases), may deduct it in the following period; in case the cumulative undeducted input VAT amount remains after twelve months from the first month or four quarters from the first quarter of occurrence, the business is entitled to a VAT refund.

2. A newly established business from an investment project registered for business and tax payment under the tax deduction method, or a project for oil and gas exploration and development still in the investment phase without operation, if the investment period is one year or more, is entitled to a VAT refund for goods and services used for investment annually. If the cumulative input VAT amount for goods and services purchased for investment reaches 300 million VND or more, the business is entitled to a VAT refund.

3. An operating business subject to VAT under the tax deduction method that has a new investment project (excluding construction projects for sale) in a province or centrally administered city different from its main headquarters location, still in the investment phase without operation and without registration for business or tax, is entitled to a VAT refund if the input VAT amount for goods and services purchased for investment reaches 300 million VND or more. The business must declare and prepare a separate refund application for this case.

4. A business in a month (for monthly declaration cases) or quarter (for quarterly declaration cases) with exported goods and services having an undeducted input VAT amount of 300 million VND or more is entitled to a monthly or quarterly VAT refund; if the undeducted input VAT amount does not reach 300 million VND in the month or quarter, it can be deducted in the following month or quarter.

5. A business subject to VAT under the tax deduction method is entitled to a VAT refund when transferring ownership, restructuring, merging, splitting, dissolving, going bankrupt, ceasing operations, and having excess paid VAT or undeducted input VAT.

6. The refund of VAT for programs and projects using official development assistance (ODA) non-repayable funds or non-repayable aid and humanitarian aid is regulated as follows:

a) The program or project sponsor, the main contractor, or the organization designated by the foreign donor to manage ODA non-repayable funds is entitled to a refund of the VAT paid for goods and services purchased in Vietnam for the program or project.

b) Organizations in Vietnam using non-repayable aid or humanitarian aid funds from foreign organizations or individuals to purchase goods and services for non-repayable aid or humanitarian aid programs in Vietnam are entitled to a refund of the VAT paid for those goods and services.

7. Foreign diplomatic personnel and entities enjoying diplomatic privileges and immunities under the law on diplomatic privileges and immunities who purchase goods and services in Vietnam for their use are entitled to a refund of the VAT recorded on the VAT invoice or payment voucher showing the payment price inclusive of VAT.

8. Foreign nationals or overseas Vietnamese residents holding passports or entry permits issued by competent authorities abroad are entitled to a VAT refund for goods purchased in Vietnam carried with them upon departure.

9. A business with a decision on VAT refund issued by the competent authority in accordance with the law and in cases of VAT refund pursuant to international treaties to which the Socialist Republic of Vietnam is a party.

Article 11. Place of Tax Payment

1. The taxpayer shall declare and pay value-added tax at the local place where production and business operations take place.

2. A taxpayer who declares and pays value-added tax under the deduction method with dependent production bases located in a different province or centrally governed city from the main office's location must pay value-added tax at both the local place where the production base is located and the local place where the main office is located.

The Ministry of Finance shall provide detailed guidance on the provisions of this Article.

Chapter V

IMPLEMENTING PROVISIONS

Article 12. Effectiveness and Responsibility for Implementation

1. This Decree takes effect from January 1, 2014, and replaces Decrees No. 123/2008/NĐ-CP dated December 8, 2008, and No. 121/2011/NĐ-CP dated December 27, 2011, of the Government detailing and guiding the implementation of certain provisions of the Law on Value-Added Tax.

Repeal Clause 1 of Article 4 of Decree No. 92/2013/NĐ-CP dated August 13, 2013, which details the implementation of certain provisions that took effect from July 1, 2013, of the Law Amending and Supplementing Certain Provisions of the Law on Corporate Income Tax and the Law on Value-Added Tax, from the date this Decree takes effect.

2. The Ministry of Finance shall provide guidance on the implementation of this Decree.

3. Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairpersons of provincial and centrally governed city People's Committees, and related organizations and individuals are responsible for implementing this Decree./.