Circular No. 65/2013/TT-BTC amending and supplementing Circular No. 06/2012/TT-BTC dated January 11, 2012 of the Ministry of Finance guiding the implementation of certain provisions of the Law on Value Added Tax, guiding the implementation of Decree No. 123/2008/NĐ-CP dated December 8, 2008 and Decree No. 121/2011/NĐ-CP dated December 27, 2011 of the Government.

 

CIRCULAR

Amending and supplementing Circular No. 06/2012/TT-BTC dated January 11, 2012 of the Ministry of Finance guiding the implementation of certain provisions of the Law on Value Added Tax, guiding the implementation of Decree No. 123/2008/NĐ-CP dated December 8, 2008 and Decree No. 121/2011/NĐ-CP dated December 27, 2011 of the Government

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;

Pursuant to Decree No. 121/2011/NĐ-CP dated December 27, 2011 of the Government amending and supplementing some articles of 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;

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008, of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

At the proposal of the Director General of the State Revenue总局局长的提议；

The Ministry of Finance guides the amendment and supplementation of some contents in Circular No. 06/2012/TT-BTC dated January 11, 2012 of the Ministry of Finance guiding value added tax as follows:

Article 1. Amending and supplementing some contents in Circular No. 06/2012/TT-BTC:

1. Amending and supplementing point a Clause 8 Article 4 Chapter I as follows:

“a) Credit services include the following forms:

- Lending;

- Discounting, rediscounting transferable instruments and other securities;

- Bank guarantees;

- Financial leasing;

- Issuing credit cards;

- Domestic factoring; international factoring for banks permitted to conduct international transactions;

- Other credit forms as prescribed by law.

Assets used to secure loans of taxpayers subject to VAT or transferred ownership to lenders when sold must be subject to VAT, except for goods not subject to VAT as stipulated in this Circular.

Example 2: In case Company Limited A mortgages chains, machinery and equipment to borrow capital from Bank B. Upon expiration of the loan period according to the credit agreement, if Company A is unable to repay the debt, Bank B sells the secured assets (including cases where the assets have been transferred or not yet transferred ownership to Bank B) to recover the debt, then these assets fall under the taxable object of VAT.”

2. Amending and supplementing point a Clause 11 Article 4 of Circular No. 06/2012/TT-BTC as follows:

“a) Public service sanitation and drainage services provided to organizations and individuals (including those within and outside industrial zones) including activities such as collection, cleaning, transportation, and treatment of waste; drainage and wastewater treatment; pumping, transporting, and treating sludge and septic tanks; unblocking public sanitary facilities and drainage systems; cleaning public restrooms; maintaining hygiene at mobile restrooms and collecting, transporting, and treating other types of waste.

If a business provides services such as office cleaning or house cleaning, these services fall under the taxable object of VAT.

Example 3: Company Limited B provides office cleaning services to Unit C, and cleaning services for corridors and staircases in residential building H, these services fall under the taxable object of VAT.”

3. Amending and supplementing Clause 2 Article 5 Chapter I as follows:

“2. Revenue from compensation, bonuses, received support funds, transfer rights revenue, and other financial revenues.

When businesses receive compensation, bonus, received support funds, transfer rights revenue, and other financial revenues, they shall issue receipts in accordance with regulations. For businesses making payments, based on the purpose of the payment, they shall issue payment vouchers.

In cases where compensation is provided in the form of goods or services, the compensating entity must issue invoices as required for sales of goods or services; the receiving entity shall declare and deduct as prescribed.

Example 10: Joint Stock Company VC signed a loan agreement with Enterprise T for a six-month period and received interest income. The interest income received by Joint Stock Company VC falls under the non-taxable object of VAT.

Example 11: Joint Stock Company P&C receives interest income from purchasing bonds and dividends from purchasing shares of other enterprises. Joint Stock Company P&C does not need to declare and pay VAT on the interest income from bond purchases and dividends received.

Example 12: Enterprise A receives a compensation of 50 million VND from Enterprise B due to contract cancellation. Enterprise A issues a receipt and does not need to declare and pay VAT on this amount.

Example 13: Enterprise X buys goods from Enterprise Y, Enterprise X pre-pays a sum of money to Enterprise Y and receives interest from Enterprise Y for the pre-paid amount, then Enterprise X does not need to declare and pay VAT on the interest received.

Example 14: Enterprise X sells goods to Enterprise Z, total payment is 440 million VND. According to the contract, Enterprise Z pays late over three months with a late payment interest rate of 1% per month of the total contract price. After three months, Enterprise X receives from Enterprise Z the total contract payment of 440 million VND and the late payment interest of 13.2 million VND (440 million VND x 1% x 3 months), then Enterprise X does not need to declare and pay VAT on this amount of 13.2 million VND.”

4. Amending and supplementing point a.3 Clause 9 Article 7 Section 1 Chapter II as follows:

“a.3) In cases where land is leased for infrastructure construction, building houses for sale or lease, the land rent deductible for calculating VAT includes the land rent payable to the state budget (excluding exempted or reduced land rent) and costs for compensation and clearance of land use rights as prescribed by law.

Example: Joint Stock Company VN-KR operates in investment and industrial production infrastructure and service sectors. The company is granted land lease by the State, paying a one-time land rent for infrastructure development in an industrial zone project; the lease term is 50 years. Leased land area is 300,000 square meters, one-time land rent payment for the entire lease period is 82,000 VND/square meter. Total land rent payable is 24.6 billion VND. The company does not receive any exemption or reduction in land rent. After completing infrastructure development, the company signs a lease contract with investors for a 49-year lease term, leasing an area of 16,500 square meters, with a lease price of 450,000 VND/square meter for the entire lease period, inclusive of VAT.”²The lump sum rent for land lease for the entire lease period is 82,000 VND/m².²The total amount of land rent to be paid is 24.6 billion VND. The company is not entitled to any exemption or reduction in land rent. After completing the infrastructure development, the company signed a contract with investors to sublease the land for a term of 49 years, with a leased area of 16,500 m².² The unit price for leasing at the time of signing the contract is 450,000 VND/m².² for the entire lease period, including VAT.

The price including VAT for the revenue from leasing infrastructure over the entire lease period (49 years) for VN-KR Joint Stock Company to investors is determined as follows:

16.500 m² x (450.000 – 82.000) = 6,072 billion VND.

The price excluding VAT is determined as: 6,072 billion VND ÷ (1 + 0.1) = 5.52 billion VND.

VAT is: 5.52 billion VND x 10% = 0.552 billion VND.

6. Supplement Point a.6 of Point a Clause 9 Article 7 Section 1 Chapter II as follows:

"a.6) In cases where a real estate business receives the transfer of land use rights for agricultural land from individuals according to a transfer contract, and subsequently obtains permission from competent state authorities to change the purpose of use to residential land for building apartments, houses... for sale, the land value deductible when calculating VAT includes the agricultural land value transferred from individuals and other costs including: the land use fee paid to the State budget for changing the purpose of use from agricultural land to residential land, personal income tax paid on behalf of individuals transferring land (if all parties agree that the real estate business will pay on behalf)."

7. Supplement at the end of Point b Clause 9 Article 7 as follows:

"In cases where infrastructure construction and operation, house construction for sale, transfer with revenue collected according to the project implementation progress or revenue collection schedule stipulated in the contract, the deductible land value shall be calculated based on the percentage of revenue collected according to the project implementation progress or revenue collection schedule stipulated in the contract compared to the total revenue stipulated in the contract, with the deductible land value as prescribed."

8. Amend Clause 3 Article 9 Section 1 Chapter II as follows:

“3. Cases not applying the 0% tax rate include:

- Reinsurance abroad; technology transfer, intellectual property transfer abroad; capital transfer, credit provision, securities investment abroad; derivative financial services; postal and telecommunications services outbound (including postal and telecommunications services provided to organizations and individuals in non-taxed zones; mobile phone recharge cards with serial numbers and denominations taken out of the country or brought into non-taxed zones); exported products are raw materials, minerals extracted without further processing; goods and services provided to individuals not registered for business in non-taxed zones, except for other cases as specified by the Prime Minister;

- Gasoline, diesel sold to businesses within non-taxed zones purchased domestically;

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

- Services provided by businesses to organizations and individuals within non-taxed zones including: renting houses, conference halls, offices, hotels, warehouses, transportation services for workers; catering services (excluding industrial meal service, catering services within non-taxed zones).

- Services provided in Vietnam to organizations and individuals outside the country which are not eligible for the 0% tax rate include:

+ Sports competitions, artistic performances, cultural, entertainment, conferences, hotel, training, advertising, travel agency services;

+ Online payment services.

Cases not applying the 0% tax rate as specified in this clause shall apply the corresponding tax rate for goods and services sold or supplied domestically.

9. Amend Clause 4 Article 14 Section 1 Chapter III as follows:

"4. Agricultural, forestry production bases, aquaculture and marine fishing enterprises that organize closed-loop production, centralized accounting of production and business results using products from agricultural, forestry production stages; aquaculture and marine fishing as raw materials for continued production and processing into taxable products (including unprocessed agricultural, forestry, 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. If a business has a project to continue production and processing and provides a written commitment to continue producing taxable products, it can declare and deduct VAT from the basic construction investment stage. For input VAT generated during the basic construction investment phase, if the enterprise has declared and deducted or refunded VAT but later determines it does not meet the conditions for deduction or refund, the enterprise must declare and adjust the repayment of the deducted or refunded VAT. If the enterprise fails to make adjustments and is discovered through inspection and audit by the tax authority, the tax authority will recover and refund taxes and impose penalties as prescribed. The enterprise shall bear full responsibility under the law for the contents reported, committed, and explained to the relevant tax authority regarding VAT deduction and refund.

In cases where the enterprise sells unprocessed or minimally processed agricultural, forestry, aquaculture, and marine products that are not subject to VAT, the amount of VAT on purchased goods and services can be deducted based on the ratio of sales of taxable goods and services to total sales.

Example 42: Enterprise A has a rubber plantation project, generating input VAT on goods and services during the basic construction investment phase, but has not yet produced raw materials for continued production and processing into taxable products (including both unprocessed export products or processed products subject to VAT), but plans to build a rubber processing plant (subject to VAT) and commits to continuing to process planted products into taxable products, then the company can deduct the entire input VAT. and If the enterprise sells unprocessed rubber that is not subject to VAT, the enterprise cannot deduct VAT.

If the enterprise uses part of the harvested rubber for production of taxable products and sells the rest, the VAT deduction shall be carried out as follows:

- Input VAT on fixed assets (rubber plantations, processing plants...): the enterprise can deduct the entire amount (including input VAT generated during the basic construction investment phase).

- Input VAT on fixed assets (rubber plantations, processing plants...): the enterprise can deduct the entire amount (including input VAT generated during the basic construction investment phase).

- Input VAT on goods and services: shall be deducted at the rate (%) of taxable turnover of goods and services subject to VAT compared to the total turnover of goods and services sold.

9. Amend Point c Clause 2 Article 15 Section I Chapter III as follows:

“c) For goods and services purchased on credit or installments with a value of goods and services purchased from twenty million dong or more, the business entity bases its declaration and deduction of input VAT on the written purchase contract for goods and services, the VAT invoice, and the bank payment voucher for goods and services purchased on credit or installments. At the same time, the business entity must clearly record the payment deadline on the declaration form for invoices and vouchers of purchased goods and services. In cases where there is no bank payment voucher due to the payment period not having arrived according to the contract, the business entity is still allowed to declare and deduct input VAT.

Upon reaching the payment deadline stipulated in the contract, if there is no bank payment voucher, the business entity shall not be entitled to deduct input VAT. The business entity must declare and adjust downward the amount of input VAT already deducted corresponding to the value of goods without a bank payment voucher. In cases where the adjustment downward of input VAT already deducted corresponds to the value of purchased goods and services without a bank payment voucher, the business entity simultaneously records an increase in costs for corporate income tax corresponding to the amount of input VAT not deductible that has been adjusted downward. After obtaining the bank payment voucher, the business entity may declare supplementary VAT and adjust downward the cost for corporate income tax accordingly. If the business entity does not record an increase in costs for corporate income tax corresponding to the amount of input VAT not deductible that has been adjusted downward, then there is no need to adjust again the cost for corporate income tax.

In cases where the payment is overdue beyond the stipulated period in the contract, the business entity does not make the downward adjustment as prescribed but before the tax authority announces the decision to inspect at the premises, if the business entity can provide sufficient evidence of bank payment vouchers, then if the failure to make the downward adjustment does not result in underpayment of taxes due or overpayment of refundable taxes, the business entity will be subject to administrative penalties for tax procedural violations. However, if the failure to make the downward adjustment results in underpayment of taxes due or overpayment of refundable taxes, the business entity will be subject to tax recovery, refund recovery, and administrative penalties as provided for in the Law on Tax Administration.

In cases where the tax authority announces a decision to inspect and audit at the premises and issues a decision not to accept the deduction of VAT for certain VAT invoices without bank payment vouchers, after receiving the tax authority's decision, if the business entity subsequently obtains bank payment vouchers:

- For VAT invoices that the business entity had previously adjusted downward before the tax authority's inspection and audit, the business entity may declare supplementary VAT.

- For VAT invoices that the business entity had not previously adjusted downward before the tax authority's inspection and audit, the business entity may declare supplementary VAT if it provides bank payment vouchers within six months from the month of the tax authority's decision.

Example 49: In November 2012, the tax authority issued a Decision to inspect VAT at Company Limited Z for the year 2011 and five months of 2012. At the time of inspection, Company Limited Z could not present bank payment vouchers for some delayed payment contracts that were due in 2011 and the first five months of 2012. As a result, the tax authority did not approve Company Limited Z's declaration of deduction of VAT for invoices without bank payment vouchers. However, in November and December 2012, Company Limited Z obtained bank payment vouchers for the invoices that had been inspected and not approved for deduction of VAT. Therefore, Company Limited Z was still able to declare supplementary deduction of VAT for these invoices with bank payment vouchers on the VAT Declaration Forms for November and December 2012.

Example 49a:

At Company Limited Super, the situation is as follows:

In February and March 2012, Company Limited Super had VAT invoices for purchasing goods under a delayed payment contract with a payment deadline of October 31, 2012. Based on the VAT invoice provided by the seller, Company Limited Super declared and deducted input VAT on the VAT Declaration Forms for February and March 2012. By the payment deadline (October 31, 2012), due to financial difficulties, Company Limited Z was unable to pay. Company Limited Super declared an adjustment downward on the VAT Declaration Form for October 2012, while accounting recorded an increase in costs for corporate income tax corresponding to the amount of input VAT not deductible that had been adjusted downward.

In April 2013, the tax authority issued a Decision to inspect VAT at Company Limited Super. For the VAT invoices for purchasing goods in February and March 2012 under a delayed payment contract with a payment deadline of October 31, 2012, since Company Limited Super had self-adjusted downward the amount of input VAT declared on the VAT Declaration Form for October 2012, the Inspection Team recorded the adjusted figures.

In May 2013, the tax authority issued a Decision to handle VAT matters concerning Company Limited Super (the Decision did not include handling of VAT for the invoices for purchasing goods in February and March 2012 under a delayed payment contract with a payment deadline of October 31, 2012, as the Inspection Team had recorded the adjusted figures).

In December 2013, Company Limited Super obtained bank payment vouchers for the delayed payment contract of the VAT invoices for purchasing goods in February and March 2012 (with a payment deadline of October 31, 2012). Then, Company Limited Super was able to declare supplementary VAT. Simultaneously, Company Limited Super adjusted downward the cost for corporate income tax accordingly.

Example 49b:

At Company Limited YKK, the situation is as follows:

- In March and April 2012, Company Limited YKK had VAT invoices for purchasing goods under payment contracts with deferred payment terms, the repayment period being within September 2012. Based on the VAT invoices provided by the seller, the accountant of Company Limited Z declared the deduction of VAT on the Tax Declaration for March and April 2012. By the repayment deadline in September 2012, Company Limited YKK was unable to make the payment, however, the company did not declare adjustments to reduce the tax.

In April 2013, the tax authority issued a Decision to inspect VAT at Company Limited YKK, covering the year 2012. At the time of inspection, Company Limited YKK could not present bank payment vouchers for the VAT invoices for purchasing goods under deferred payment contracts with the repayment period being within September 2012. The inspection team did not approve Company Limited YKK's declaration of VAT deductions for invoices without bank payment vouchers.

In May 2013, the tax authority issued a Decision to recover VAT at Company Limited YKK.

In October 2013, when Company Limited YKK had bank payment vouchers for the deferred payment contract of the VAT invoice for purchasing goods in March 2012 (with the repayment period being within September 2012), Company Limited YKK was allowed to declare supplementary adjustment of VAT due to the presence of bank payment vouchers within six months from the date the tax authority issued the Decision to recover VAT.

In December 2013, when Company Limited YKK had bank payment vouchers for the deferred payment contract of the VAT invoice for purchasing goods in April 2012 (with the repayment period being within September 2012), Company Limited YKK was not allowed to declare supplementary adjustment of VAT due to the presence of bank payment vouchers exceeding the six-month period from the date the tax authority issued the Decision to recover VAT.

Example 49c:

In September 2012, the Provincial Tax Department B issued a Decision to handle taxes and impose administrative penalties on Joint Stock Company PNG following an inspection of tax law compliance. The Decision included the recovery of VAT refund amounting to 460,000,000 VND, which was the VAT deducted for purchases over 20 million VND that lacked bank payment vouchers at the time of inspection, exceeding the contract deadlines for the refund period from January to March 2012. Joint Stock Company PNG complied fully with the payment of the recovered tax into the State Budget.

In October 2012, when Joint Stock Company PNG had bank payment vouchers for the purchase invoices corresponding to the VAT amount of 460,000,000 VND that had been recovered by the tax authority, Joint Stock Company PNG was allowed to declare supplementary adjustment on the VAT Tax Declaration for October 2012.

10. Amend Clause 3, Clause 4 of Article 18, Section 2, Chapter III as follows:

“3. Business establishments currently operating and subject to VAT under the deduction method, having new investment projects within the same province or city, during the investment phase, must declare offsetting of VAT on goods and services purchased for the new investment project together with the declaration of VAT on ongoing business activities.

After offsetting, if there is a remaining VAT on goods and services purchased for the investment project of 200 million VND or more that has not yet been deducted, then the VAT refund for the investment project will be granted. If the VAT input of the ongoing business activities and the investment project is less than 200 million VND and has not been deducted within three months, the business establishment may apply for a refund according to the provisions of Clause 1 of this Article.

In cases where business establishments currently operating and subject to VAT under the deduction method have new investment projects in different provinces or centrally-administered cities compared to their main office location, during the investment phase before operation and registration for business and tax purposes, if there is a VAT input of 200 million VND or more for goods and services purchased for the investment project, then the VAT refund for the investment project will be granted. The business establishment must declare and prepare separate refund documents for this case. If there is a project management board, it shall register, declare, and prepare separate refund documents with the local tax authority (except for the project management board located in the same province or city as the main office, which the main office shall prepare the VAT refund documents). When the investment project completes and finishes all registration procedures for establishing a new business, the business establishment as the investor must consolidate the VAT generated, the VAT refunded, and the undeducted VAT of the project to hand over to the newly established business for it to declare, pay taxes, and request a VAT refund according to regulations with the directly managing tax authority.

4. Business establishments that have both exported goods and services and sold them domestically in the same month, if the VAT input generated in the month has not been deducted by 200 million VND or more (the VAT input generated in the month includes: VAT input for export activities, domestic sales activities subject to tax, and undeducted VAT carried forward from previous months), but after offsetting with the VAT output of goods and services sold domestically and allocating according to the percentage ratio between export revenue and total taxable revenue of the business in the period, if the undeducted VAT input for exported goods and services calculated as above is less than 200 million VND, the business establishment will not be eligible for monthly refunds. If the undeducted VAT input is 200 million VND or more, the business establishment will be eligible for monthly VAT refunds for exported goods and services.

Specifically:

 

Example:

In March 2012, Enterprise X's VAT declaration shows the following figures:

- VAT carried over from the previous period: VND 150 million.

- VAT input tax arising in the month for export activities and domestic business activities subject to tax: VND 4.8 billion.

- Total revenue (TR) is VND 21.6 billion, including: Export revenue (ER) is VND 13.2 billion, domestic sales revenue subject to VAT is VND 8.4 billion.

ER/TR ratio = 13.2/21.6 x 100% = 61%.

- VAT output tax on goods and services sold domestically is VND 840 million.

The VAT refund for exported goods for the month is determined as follows:

Therefore, the undeducted VAT input tax of the month is VND 4.11 billion.

- Determine the VAT input tax on exported goods

The undeducted VAT input tax on exported goods (after offsetting and allocation) is VND 2.507 billion, which is greater than VND 200 million. Accordingly, the enterprise is entitled to a refund of VND 2.507 billion VAT for the month. The undeducted VAT input tax on domestic sales of goods and services is VND 1.603 billion (VND 1.603 billion = VND 4.11 billion - VND 2.507 billion), which will be carried forward for deduction in the next period.

Article 2. Implementing organization.

This Circular takes effect from July 1, 2013.

For cases where the lessor issued invoices and calculated VAT when leasing workshops to export processing enterprises from March 1, 2012 onwards, both parties shall issue adjusted VAT invoices with a VAT rate of 0%.

For cases where businesses that are not financial institutions issued invoices and calculated VAT on interest income from loans to other organizations and individuals from March 1, 2012 onwards, both parties shall issue adjusted invoices and adjust the interest income to non-VAT taxable items. If the parties do not adjust the issued invoices, and if the borrowing organization uses the borrowed funds for VAT taxable business activities, it may deduct VAT input tax based on the VAT invoice issued by the lending party.

For service digitization contracts signed with foreign parties before this Circular takes effect, VAT shall continue to be implemented according to the guidance provided in the relevant legal regulations at the time of contract signing. For service digitization contracts signed with foreign parties from March 1, 2012 onwards, which fall under the scope of VAT but now apply a 0% tax rate under this Circular, they shall be governed by this Circular from March 1, 2012.

Any matters not covered by this Circular and those not contradictory to the provisions of this Circular shall be implemented in accordance with Circular No. 06/2012/TT-BTC dated January 11, 2012, issued by the Ministry of Finance regarding VAT.

During implementation, if there are difficulties or obstacles, units are requested to report to the Ministry of Finance for timely guidance and resolution.