DECREE 209 ON VALUE ADDED TAX

Transcription

1 DECREE 209 ON VALUE ADDED TAX Dated 18 December 2013 As amended by Decree 91 dated 1 October 2014, Decree 12 dated 12 February 2015, Decree 100 dated 1 July 2016, Decree 10 dated 9 February 2017 and Decree 146 dated 15 December 2017 CONTENTS CHAPTER GENERAL PROVISIONS... 1 Article 1 Applicable scope... 1 Article 2 Taxpayers... 1 Article 3 Non-taxable objects... 2 CHAPTER BASIS AND METHOD OF TAX ASSESSMENT... 7 Article 4 Taxable prices... 7 Article 5 Point of time for determining VAT Article 6 Tax rates Article 7 Tax credit method Article 8 Method of calculating tax directly on the basis of added value CHAPTER TAX CREDIT AND TAX REFUND Article 9 Credit of input value added tax Article 10 VAT refund Article 11 Place of tax payment CHAPTER IMPLEMENTING PROVISIONS Article 12 Effectiveness and implementing guidelines Allens - Vietnam Laws Online Database on i

2 GOVERNMENT SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness No ND-CP Hanoi, 18 December 2013 As amended 1 October 2014, 12 February 2015, 1 July 2016 and 9 February 2017 and 15 December DECREE ON VALUE ADDED TAX Making detailed provisions and guidelines for implementation of a number of articles of the Law on Value Added Tax The Government Pursuant to the Law on Organization of the Government dated 25 December 2001; Pursuant to the Law on Value Added Tax ["VAT"] dated 3 June 2008; Pursuant to the Law Amending the Law on Value Added Tax dated 19 June 2013; Upon the proposal of the Minister of Finance; The Government hereby issues a Decree making detailed provisions and guidelines for implementation of a number of articles of the Law on Value Added Tax, CHAPTER 1 General Provisions Article 1 Applicable scope This Decree provides detailed provisions and guidelines for implementation of a number of articles of the Law on VAT 2 and the Law Amending the Law on VAT in relation to taxpayers, non-taxable objects, taxable prices, tax rates, methods of tax assessment, tax credit, tax refund and places of tax payment. Article 2 Taxpayers 1. Value added taxpayers are organizations and individuals engaging in manufacturing and/or conducting business in value added taxable goods and services (hereinafter all referred to as business establishments) and organizations and individuals importing value added taxable goods (hereinafter all referred to as importers). 1 2 Allens footnote: As amended by Decree 91 dated 1 October 2014, effective 15 November The amendments are to articles 3.2(a), 9.1(c) and 9.2(b) and have been footnoted for easy reference. Also as amended by Decree 12 dated 12 February 2015, effective 1 January 2015, see footnotes. And also as amended by Decree 100 dated 1 July 2016, effective 1 July 2016, see footnotes to articles 3.1, 3.6, 3.11, 6.1(dd) and 10. And also as amended by Decree 10 dated 9 February 2017, effective 1 April 2017, see footnote to article 4.4; And as amended by Decree 146 dated 15 December 2017, effective 1 February 2018, see footnotes to articles 3.11 and Allens footnote: "Value added tax" is hereinafter abbreviated to "VAT" for easy reference. Allens - Vietnam Laws Online Database on 1

3 2. Taxpayers also include organizations and individuals purchasing services when such purchasers are entities engaging in manufacturing and/or conducting business in Vietnam (including cases of purchase of services associated with goods) from foreign organizations without a resident establishment in Vietnam or from individuals overseas who are non-residents of Vietnam, except for the cases in which declaration, assessment and payment of VAT is not required as stipulated in clause 3(b) of this article. The provision in this clause on resident establishments and on individuals overseas who are non-residents shall be implemented in accordance with the law on corporate income tax and the law on personal income tax. 3. It is not required to declare, assess and pay VAT in the following cases: (a) (b) (c) (d) Organizations and individuals receiving income comprising compensation, bonuses and/or allowances receivable, proceeds from assignment of emission rights and other financial income. Organizations and individuals manufacturing and/or conducting business in Vietnam who purchase the following types of services from foreign organizations without a resident establishment in Vietnam or from individuals overseas who are non-residents of Vietnam: repair of transport vehicles or of machinery or equipment (including replacement parts and materials); advertising and marketing; investment and commercial promotion; brokerage for sale of goods and/or provision of services; training; sharing fees and charges for international post and telecom services between Vietnam [the Vietnamese party] and the foreign party where such services are provided outside Vietnam. Organizations and individuals who do not conduct business and who are not VAT taxpayers when they sell assets. Organizations and individuals transferring an investment project for production or business in value added taxable goods or services to enterprises or cooperatives. (dd7) Products from cultivation or breeding and aquatic products which have not yet been processed to become other products or which have only been subject to conventional semi-processing for sale to enterprises and co-operatives except for the cases specified in article 5.1 of the Law on VAT. The Ministry of Finance shall provide specific guidelines on the provisions of clauses 2 and 3 of this article. Article 3 3 Non-taxable objects Non-taxable objects are determined in accordance with article 5 of the Law on VAT, article 1.1 of the Law Amending the Law on VAT, and article 1.1 of Law [106 dated 6 April 2016] Amending the Law on VAT, the Law on SST and the Law on Tax Management. 1. Products which have only been subject to conventional semi-processing as stipulated in article 5.1 of the Law on VAT and in article 1.1 of Law [106 dated 6 April 2016] Amending the Law on VAT, the 3 Allens footnote: The introduction and clause 1 are as amended by Decree 100 dated 1 July 2016, but only by adding the underlined words. Allens - Vietnam Laws Online Database on 2

4 Law on SST and the Law on Tax Management means products which have only been cleaned, sun-dried, industrially dried, unshelled, de-seeded, cut, salted and/or refrigerated or which have been otherwise preserved by conventional methods. 1b. 4 Fertilizers; feed for cattle, poultry, aquaculture and for other livestock including processed and unprocessed types of feed such as bran, offal, all types of oil-cake, fish powder, bone powder, shrimp powder and other types of feed for cattle, poultry, aquaculture and other livestock, and additives for feed for livestock (such as premix, and anima). The Ministry of Finance shall preside over co-ordination with the Ministry of Agriculture and Rural Affairs to provide guidelines on the various types of feed for cattle, poultry, aquaculture and for other livestock and feed additives which are in the category of non-taxable as prescribed in this clause. 1c. 5 Deep-sea fishing vessels; specialized machinery and equipment servicing agricultural production and including ploughing machines; harrowing machines; milling and splitting machines; equipment for bulldozing or raising fields; seeding machines; transplanting machines; sugarcane planting machines; cultivators, machines for digging up vegetable beds, machines for fertilizing beds and fields; plant protection agent machines and spraying guns; rice harvesting machines, and machines for harvesting corn, sugarcane, coffee and cotton; machines for harvesting bulbs, tree roots and fruit; tea adzing and tea picking machinery; rice threshing machines; corn sheathing and corn shelling machines; peanut shelling machines; coffee grinding machines; machinery and equipment for preliminary processing of coffee and paddy; agricultural drying machinery for rice, corn, coffee, pepper, cashew nuts and so forth and for aquaculture; machinery for harvesting, peeling or shelling sugarcane, rice and straw in the field; machinery for hatching poultry eggs; machinery for harvesting hay, and for bailing straw; machinery for making fresh juices and other types of specialized machinery. The Ministry of Finance shall preside over co-ordination with the Ministry of Agriculture and Rural Affairs to provide guidelines on the various types of specialized machinery used for agricultural production which are in the category of non-taxable as prescribed in this clause. 2. A number of services stipulated in article 5.8 of the Law on VAT and article 1.1 of the Law Amending the Law on VAT are regulated as follows: (a) 6 Services of extension of credit comprise the following forms: - Lending; - Discounting and re-discounting negotiable instruments and other valuable papers; - Providing guarantees; - Finance leasing; - Issuing credit cards; - Domestic debt factoring; international debt factoring; Allens footnote: As added by Decree 12 dated 12 February Allens footnote: As added by Decree 12 dated 12 February Allens footnote: As amended by Decree 12 dated 12 February 2015 by addition of the underlined phrase. Allens - Vietnam Laws Online Database on 3

5 - Selling assets being security for loans, including when the borrower itself sells the security assets in accordance with authorization from the lender in order to repay the secured loan; if the person with the security assets is unable to repay the debt and must handover the assets to a credit institution to deal with the assets securing the loan monies in accordance with law, it is not necessary to present an added value invoice; - Providing credit information in accordance with the Law on State Bank; - Other forms of extending credit as stipulated by law. (b) (c) (d) (dd) (e) (g) Lending services provided by taxpayers not being credit institutions; Securities business comprises securities broking, securities self-trading, underwriting issues of securities, securities investment consultancy, securities depository, management of securities investment funds, management of securities investment companies, management of securities investment portfolios, services of organizing a market by Stock Exchanges or Securities Trading Centres, services related to securities registered and/or deposited at the Vietnam Securities Depository, lending of money to clients to carry out margin trading, and advancing proceeds from selling securities and other services stipulated by the laws on securities. Capital transfers comprise the transfer of a part or the entire amount of capital already invested, including sale of an enterprise to another enterprise in order to conduct production and/or business, transfers of securities, transfers of the right to make capital contribution and other forms of capital transfers stipulated by law. Sale of debts. Foreign exchange business. Sale of assets being security for debts of organizations in which the State owns one hundred (100) per cent of the charter capital and which are established by the Government in order to deal with bad debts of credit institutions of Vietnam Medical examination and treatment services stipulated in article 1.1 of Law [106 dated 6 April 2016] Amending the Law on VAT, the Law on SST and the Law on Tax Management also includes transportation, tests, screening and x-rays, and blood and blood products used for patients. Services of caring for elderly and disabled people as stipulated in article 1.1 of Law [106 dated 6 April 2016] Amending the Law on VAT, the Law on SST and the Law on Tax Management comprise healthcare and nutritional care, and organizing cultural, sporting and recreational activities, physiotherapy and functional rehabilitation for such elderly and disabled people. 4. Services of maintenance of zoos, gardens and parks, trees in streets and public lighting systems; and funeral services. The Ministry of Finance shall provide specific guidelines on non-taxable services set out in this clause. 7 Allens footnote: Clause 3 is as amended by Decree 100 dated 1 July 2016, by adding the underlined words. Allens - Vietnam Laws Online Database on 4

6 5. If the activities of maintenance, repair and construction of buildings or works stipulated in article 5.12 of the Law on VAT are funded by sources other than public contributions from citizens (comprising capital contributions and aid from organizations and individuals) and humanitarian aid, and such other funding sources do not exceed 50% of the total amount of capital used for such buildings or works, then the entire buildings or works are non-taxable objects. People entitled to social welfare comprise people whose work has contributed to the State in accordance with the relevant law; people who receive social benefits or allowances funded by the State budget; and people belonging to poor households and people close to the poverty line and other cases stipulated by law Public passenger transportation as stipulated in article 5.16 of the Law on VAT comprises public passenger transport by bus and electrical vehicles [trams] on internal provincial routes [routes within a province], urban routes [routes within an urban area] and neighbouring routes outside the province in accordance with the law on traffic. 7. Aircraft stipulated in article 5.17 of the Law on VAT and article 1.1 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT also includes aircraft engines. The Ministry of Planning and Investment shall preside over co-ordination with the relevant bodies to issue a list of machinery, equipment and supplies in the category of able to be produced domestically in order to provide the basis for distinguishing items unable to be produced domestically and which therefore need to be imported to be used directly for scientific research and technological development activities; and a list of machinery, equipment, replacement accessories, specialized transport vehicles and supplies in the category of able to be produced domestically in order to provide the basis for distinguishing items unable to be produced domestically and which therefore need to be imported to carry out prospecting, exploration and development of oil and gas fields; and a list of aircraft, drilling rigs and watercraft in the category of able to be produced domestically in order to provide the basis for distinguishing items unable to be produced domestically and which therefore need to be imported to create fixed assets of enterprises and which are leased from overseas for use in production and/or business, for leasing out or sublease. 8. The Ministry of Defence and the Ministry of Public Security shall, after reaching agreement with the Ministry of Finance, provide specific regulations on what constitutes specialized arms and weaponry required for national defence and security as stipulated in article 5.18 of the Law on VAT. 9. Imported goods as stipulated in article 5.19 of the Law on VAT are regulated in detail as follows: (a) (b) (c) Humanitarian aid goods and non-refundable aid goods which are imported must have approval from the competent State authority. [The import of] gifts to State bodies, political organizations, socio-political organizations, sociopolitical-professional organizations, social organizations, socio-professional organizations and units of the people's armed forces must be implemented in accordance with the law on gifts and donations. The fixed levels [i.e. the limits on value] of imported goods being donations or gifts to individuals in Vietnam must comply with the law on gifts and donations. 8 Allens footnote: Clause 6 is as amended by Decree 100 dated 1 July 2016 (only by the underlined words). Allens - Vietnam Laws Online Database on 5

7 (d) (dd) Belongings of foreign organizations and individuals in accordance with the standards of diplomatic immunity; and hand luggage within the limit of duty-free goods. Goods and services sold to foreign organizations and individuals for humanitarian aid or nonrefundable aid to Vietnam. 10. If a technology transfer or intellectual property right transfer as stipulated in article 5.21 of the Law on VAT also includes a transfer of machinery or equipment, then the non-taxable object shall be calculated as a ratio of the value of the technology transfer or intellectual property right transfer; and if it is impossible to make a separation in order to calculate this ratio, then VAT tax must be calculated not only on the value of the technology transfer or intellectual property right transfer but also on the value of the machinery or equipment Export products being exploited natural resources or mined minerals which have not been processed into other products. Export products being goods processed directly from main raw materials being natural resources or minerals with a total value of such natural resources or minerals plus energy expenses accounting for 51% or more of the cost price of the export product, except in the following cases: - Export products processed from natural resources or minerals which a business establishment directly produced [exploited and/or mined] and then [itself] processed or hired another establishment to process and which, during the processing procedure, formed other products and thereafter further processing produced the export products (the processing procedure was enclosed or self-contained, or was conducted in-factory or at a processing plant for each stage), then such export products are within the category subject to the VAT rate of 0% if all the conditions prescribed in article 12.2(c) of the Law on VAT are satisfied. - Export products processed from natural resources or minerals which a business establishment purchased to [itself] process or to hire another establishment to process and which, during the processing procedure, formed other products and thereafter further processing produced the export products (the processing procedure was enclosed or self-contained, or was conducted in-factory or at a processing plant for each stage), then such export products are within the category subject to the VAT rate of 0% if all the conditions prescribed in article 12.2(c) of the Law on VAT are satisfied. - Export products processed from main raw materials not being natural resources or minerals (natural resources or minerals processed into other products) which a business establishment purchased to [itself] process or to hire another establishment to process into the export products are within the category subject to the VAT rate of 0% if all the conditions prescribed in article 12.2(c) of the Law on VAT are satisfied. Natural resources and minerals prescribed in article 5.23 of the Law on VAT means natural resources and minerals sourced domestically and comprise metallic minerals, non-metallic minerals, crude oil, natural gas and coal gas. - The value of natural resources and minerals made available for processing is determined as follows: in the case of directly exploited natural resources or directly exploited [mined] minerals, it means the direct and indirect costs of such exploitation or mining to produce the 9 Allens footnote: Clause 11 is as amended by Decree 146 dated 15 December Allens - Vietnam Laws Online Database on 6

8 natural resources or minerals respectively, but excluding the costs of transporting them from the place where they were exploited or mined to the place where they were processed; and in the case of natural resources or minerals purchased for further processing, it means the actual purchase price excluding the costs of transporting them from the place of purchase to the place of processing. Energy expenses comprise fuel, electrical energy and thermal energy. The percentage value of natural resources or minerals plus energy expenses over the production cost price of the export product is determined on the basis of the accounting finalization of the previous year and this percentage is applicable on a stable basis throughout the year of export. If it is the first year of export of the product, then the percentage value of natural resources or minerals plus energy expenses over the production cost price of the export product is determined on the basis of the investment plan and this percentage is applicable on a stable basis throughout the year of export; in a case where there is no investment plan, then the percentage value of natural resources or minerals plus energy expenses over the production cost price of the export product is determined on the basis of the actual status of the export product. The Ministry of Finance shall preside over coordination with other relevant agencies in providing specific guidelines on determining what are exploited natural resources or mined minerals which have not been processed into other products as stipulated in this clause. 12. Goods and services of business households and individuals with an annual turnover of one hundred million (100,000,000) dong or less. The Ministry of Finance shall provide guidelines for business households and individuals with an annual turnover of one hundred million (100,000,000) dong or less which is not subject to VAT stipulated in this clause. CHAPTER 2 Basis and Method of Tax Assessment Article 4 Taxable prices Taxable prices are determined in accordance with article 7 of the Law on VAT and article 1.2 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT. 1. In the case of goods and services which the manufacturing and/or business establishment sells, taxable price is the selling price excluding VAT; in a case of goods and services subject to special sales tax ["SST"], taxable price is the selling price with SST but excluding VAT; in the case of goods subject to environmental tax, taxable price is the selling price with environmental tax but excluding VAT; and in the case of goods subject to both SST and environmental tax, taxable price is the selling price with SST and environmental tax but excluding VAT. In the case of import goods, taxable price is the import price at the border gate plus import duty (if any) plus SST (if any) plus environmental tax (if any). Import price at the border gate shall be determined in accordance with regulations on taxable price of import goods. Allens - Vietnam Laws Online Database on 7

9 In the case of purchase of services stipulated in article 2.2 of this Decree, taxable price is the payment price recorded in the contract for purchase of the services excluding VAT. 2. In the case of goods and services used for exchange, for internal consumption, or for a gift or donation, taxable price is the value added taxable price of goods or services of the same or similar type as at the time of such exchange, internal consumption, gift or donation. The taxable price of zero applies to a gift or donation (without receipt of money) of an invitation to see an art performance, fashion show, beauty contest, model parade or sporting contest licensed by the competent authority in accordance with law. In the case of goods and services which are used for trade promotion in accordance with the law on commerce, the taxable price shall be determined to equal zero; and goods and services which are used for trade promotion which is not conducted in accordance with the law on commerce shall be declared for assessing and paying tax as goods and services used for internal consumption, for a gift or donation. Goods and services for internal consumption as stipulated in this clause means goods or services which the business establishment releases or provides for consumption purposes, except for goods and services used to continue the process of production or business. 3. Value added taxable price in the case of real property transfer activities is the price of the real property transfer less the deductible land price for assessing VAT. (a) 10 The deductible land price for assessing VAT is specifically regulated as follows: - Where the State allocates land for investment in infrastructure for construction of housing for sale, the deductible land price for assessing VAT comprises land use fees payable to the State budget (excluding any exempt or reduced land use fees) and expenses of paying compensation and conducting site clearance as stipulated by law; - Where a land use right is auctioned, the deductible land price for assessing VAT is the auction winning land price; - Where land is leased for construction of infrastructure or for construction of housing for sale, the deductible land price for assessing VAT is land rent payable to the State budget (excluding any exempt or reduced land rent) and expenses of paying compensation and conducting site clearance as stipulated by law; - In a case where a business establishment receives a transfer of a land use right from an organization or individual, then the deductible land price for assessing VAT is the land price at the time of receipt of such transfer of the land use right including the value of infrastructure (if any); the business establishment is not permitted to declare and credit input VAT of the infrastructure already included in the deductible value of the land use right not subject to VAT. If the deductible land price does not include the value of infrastructure, the business establishment is permitted to declare and credit input VAT levied on the infrastructure which has not yet been included in the deductible value of the land use right not subject to VAT. Where it is impossible to determine the land price at the time of receipt of the transfer, then the deductible land price for assessing VAT is the 10 Allens footnote: As amended by Decree 12 dated 12 February 2015 by addition of the underlined phrases. Allens - Vietnam Laws Online Database on 8

10 land price stipulated by the provincial people's committee at the time of signing the contract for receipt of the transfer. - In a case where a business establishment receives a capital contribution in the form of a land use right from an organization or individual, then the deductible land price for assessing VAT is the price recorded in the capital contribution contract. If the price for the assignment of the land use right is less than the price of the land received as capital contribution, then only the price being the price of the assignment is deductible; - In a case where an establishment conducts real property business in the BT (build - transfer) form for payment by a value of a land use right, then the deductible land price for assessing VAT is the price at the time of signing the BT contract in accordance with law; where such price has not yet been fixed at the time of signing the BT contract, the deductible land price is the land price determined by the provincial people's committee for payment for the construction work. (b) In a case of construction and/or commercial operation of infrastructure, or construction of housing for sale, transfer or to let, value added taxable price is the proceeds receivable according to the schedule for implementation of the project or the schedule for receipt of moneys stipulated in the contract less the deductible land price corresponding to the ratio of the money received over the total contractual value Declaration, calculation and payment of value added tax by Vietnam Electricity: Vietnam Electricity and its member units declare and pay tax in accordance with the law on taxation. (b) Declaration and payment of VAT by power production companies which conduct dependent accounting under Vietnam Electricity and which conduct dependent accounting of power generation corporations under Vietnam Electricity are carried out as follows: - Power production companies which conduct dependent accounting under Vietnam Electricity and which conduct dependent accounting of power generation corporations declare and pay VAT by the tax credit method in respect of power production activities in the localities where such companies are based. - The amount of VAT payable of power production activities is determined as follows: Amount of VAT payable of power production activities = Amount of output VAT - Deductible amount of input VAT - The amount of output VAT is determined as follows: Amount of output VAT Power productivity x Taxable price x VAT rate (10%) Of which: 11 Allens footnote: As amended by Decree 10 dated 9 February 2017 by replacing the previous clause 4 with the underlined clause. Allens - Vietnam Laws Online Database on 9

11 - Power productivity is the productivity delivered and received according to power meters as confirmed between the power production company and the power transmission company and the power sale and purchase company. - The value added taxable price of power of power production companies which conduct dependent accounting under Vietnam Electricity and which conduct dependent accounting of power generation corporations is the power sale price to customers stated on invoices according to the power sale and purchase contract. If power production companies which conduct dependent accounting under Vietnam Electricity and which conduct dependent accounting of power generation corporations do not sell power directly to customers, the value added taxable price is determined as follows: - The taxable price for power of dependent accounting hydroelectric companies is the power selling price to their parent companies announced by Vietnam Electricity before 31 March every year for uniform application, which shall not be lower than the average power production costs of the immediately preceding year (not including loan interest and exchange rate difference costs) of hydroelectric plants which conduct dependent accounting under Vietnam Electricity and of hydroelectric plants which conduct dependent accounting of power generation corporations. - The value added taxable price of thermal electric plants is the selling price to their parent companies announced by Vietnam Electricity before 31 March every year for uniform application, which shall not be lower than the average power purchase price of the immediately preceding year of Vietnam Electricity. - The deductible amount of input VAT is the total amount of VAT stated in the invoice for purchase of goods or services which satisfies the condition for tax deduction in accordance with the Law on Value Added Tax. 5. In the case of casino services, electronic games with prizes and other betting entertainment businesses, taxable price is the proceeds from such operation including special sales tax, less sums paid as prizes to customers. 6. Value added taxable prices of goods and services stipulated in article 7.1 of the Law on VAT and article 1.2 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT shall include extra charges and sub-charges [on top of the price of the goods or services] to which the business establishment is entitled. The Ministry of Finance shall provide specific guidelines on taxable prices stipulated in this article. Article 5 Point of time for determining VAT 1. The point of time for fixing determining VAT on goods is the time when ownership of the goods or the right to use the goods is transferred to the purchaser, irrespective of whether or not money has been received. 2. The point of time for fixing VAT on services is the time when the provision of services to the purchaser is completed or when an invoice is issued for provision of the services, irrespective of whether or not money has been received. 3. The Ministry of Finance shall provide specific guidelines on the point of time for determining VAT in a number of special cases. Allens - Vietnam Laws Online Database on 10

12 Article 6 Tax rates Tax rates are determined in accordance with article 8 of the Law on VAT and article 1.3 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT. 1. The tax rate of zero per cent (0%) applies to export goods and services, to international transportation, and to goods and services not subject to VAT as stipulated in article 5 of the Law on VAT and article 1.1 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT when they are exported, except for the goods and services stipulated in sub-clause (dd) below. Export goods and services mean goods and services sold or provided to organizations and individuals overseas and consumed outside Vietnam or in non-tariff zones or goods and services provided to foreign customers in accordance with law. (a) (b) [The tax rate of zero per cent (0%) applies to] goods which are exported abroad or which are sold to a non-tariff zone; or used for a construction or installation work in a foreign country or in non-tariff zones; or goods sold for which the point of delivery is located outside Vietnam; replacement parts and materials provided for repair or maintenance of means, machinery or equipment for foreign parties and consumed outside Vietnam; for on-site export and other cases deemed to be export goods stipulated by law. Export services include services directly provided to organizations and individuals in a foreign country or in non-tariff zones and consumed outside Vietnam or in non-tariff zones. In the case of provision of services and such provision is carried out both in and outside Vietnam while the service contract is signed between the two taxpayers which are in Vietnam or have a resident establishment in Vietnam, the tax rate of zero per cent (0%) only applies to the part of the value of services provided outside Vietnam, except for provision of insurance services for imported goods which is subject to the tax rate of zero per cent (0%) on the whole contract value. Where it is impossible to separately determine the part of the value of services provided in Vietnam in the contract, the taxable price shall be calculated as a ratio (%) being costs incurred in Vietnam over the total costs. An individual overseas means a foreigner not residing in Vietnam or a Vietnamese residing abroad and outside Vietnam during the duration of provision of services. An organization or individual in a non-tariff zone means any such entity who has registered business or other cases as stipulated in regulations of the Prime Minister of the Government. (c) (d) International transportation as stipulated in this clause includes carriage of passengers, luggage and cargo on an international stage from Vietnam to a foreign country or vice versa, or when both departure and arrival locations are overseas. If an international transportation contract includes an internal [domestic] transport stage, then international transportation shall be deemed to include such internal stage. Export goods and services as stipulated in paragraphs (a) and (b) of this clause must satisfy all the conditions stipulated in article 9.2(c) of this Decree in order for the tax rate of 0% to apply, except for goods and services to which the tax rate of 0% is applied on conditions stipulated by the Ministry of Finance. Allens - Vietnam Laws Online Database on 11

13 (dd) 12 The cases to which the VAT rate of 0% does not apply comprise: - Transfers of technology or transfer of an intellectual property right to overseas; - Offshore reinsurance; - Supplies [extension] of credit to overseas; - Capital transfers to overseas; - Offshore securities investment; - Derivative financial services; - Post and telecom services; - Export products [being exploited natural resources and mined minerals which have not yet been processed to become other products] as stipulated in article 3.11 of this Decree; - Goods and services supplied to individuals without business registration in a non-tariff zone; - Tobacco, wine and beer which is imported and thereafter exported. (e) The Ministry of Finance shall specify other goods and services which are provided to organizations and individuals overseas and to which tax rate of 0% shall apply and goods and services which are provided to foreign organizations and individuals but are consumed in Vietnam and to which tax rate of 0% shall not apply. 2. The tax rate of 5% applies to goods and services stipulated in article 8.2 of the Law on VAT and article 1.3 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT. A number of specific cases to which tax rate of 5% applies are regulated as follows: (a) (b) 13 Clean water for manufacturing and for living purposes as stipulated in article 8.2(a) of the Law on VAT does not include bottled drinking water, or various types of beverages and refreshments to which the tax rate of 10% applies. The products stipulated in article 8.2(b) of the Law on VAT comprise: - Ores used for production of fertilizers being types of raw material ores used to produce fertilizers; - Pesticides including plan protection products and other type of pesticides; - Growth stimulants for livestock and crops. (c) 14 [Feed for cattle, poultry and other animals as stipulated in article 8.2(c) of the Law on VAT comprises all types of unprocessed or processed feed such as bran, offal, mill cake of all types, fish powder and bone powder.] Allens footnote: As amended by Decree 12 dated 12 February 2015 by taking out the underlined phrase. Allens footnote: As amended by Decree 12 dated 12 February Allens footnote: Repealed by Decree 12 dated 12 February Allens - Vietnam Laws Online Database on 12

14 (d) (dd) The semi-processing and preserving services stipulated in article 8.2(d) of the Law on VAT comprise sun-drying, industrial drying, un-shelling, de-seeding, cutting and slicing, husking, refrigerating, salting and other normal preservative methods. Fresh food produce as stipulated in article 8.2(g) of the Law on VAT comprises all types of uncooked foodstuffs or foodstuffs which have not yet been processed to become other products. Unprocessed forestry products as stipulated in article 8.2(g) of the Law on VAT comprise other products exploited from natural forests in the categories of rattan, bamboo, mushrooms; roots, leaves, flowers and plants used to produce medicines; and resin and other types of forestry products. (e) (g) Article 7 Pharmaceutical products and pharmaceutical materials which are raw materials used for producing preventive and curative medicine as stipulated in article 8.2(l) of the Law on VAT. Social residential houses stipulated in article 8.2(q) of the Law on VAT and article 1.3 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT which are residential houses that the State or organisations and individuals in all economic sectors invest in construction and which satisfy the criteria in relation to residential housing, selling prices of houses, rent, purchase-lease prices and purchasers or leases and conditions for purchase, lease or purchase-lease of social residential houses in accordance with the law on residential housing. Tax credit method The tax credit method shall be implemented in accordance with article 10 of the VAT and article 1.4 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT. 1. The amount of VAT payable pursuant to the tax credit method equals the amount of output VAT less the amount of creditable input VAT The amount of output VAT equals the total VAT of the goods or services sold as recorded on the added value invoice. VAT recorded on the added value invoice equals the taxable price of the VAT taxable goods or services sold, multiplied by the VAT rate of such goods or services. If a payment voucher recording the payment price as VAT inclusive is used, then output VAT equals the payment price less the taxable price determined in accordance with article 7.2(k) of the Law on VAT. 3. Creditable input VAT shall be determined as follows: (a) The amount of VAT recorded on the added value invoice for purchase of the goods or services; on the voucher paying VAT on the imported goods, or on the voucher paying tax in a case of purchase of services as stipulated in article 2.2 of this Decree. 15 Allens footnote: An alternative translation is "deductible input VAT". Allens - Vietnam Laws Online Database on 13

15 In respect of purchased goods or services which use payment vouchers recording the payment price as VAT inclusive, the amount of creditable input VAT equals the payment price less the taxable price stipulated in article 7.1(k) of the Law on VAT. (b) The conditions for VAT to qualify as creditable input VAT shall be implemented in accordance with article 9.2 of this Decree. 4. The tax credit method applies to: (a) Business establishments currently operating and having an annual turnover of one billion Dong or more from sale of goods and provision of services and fully implementing the regime on accounting, invoices and source documents in accordance with the law on accounting, invoices and source documents, except for business households and individuals making tax payment in accordance with the method of calculating tax directly [on the basis of added value] stipulated in article 8 of this Decree. The duration for stable application of the method of tax assessment shall be two consecutive years. The Ministry of Finance shall provide guidelines on the method of calculating turnover to provide a basis for determination for a business establishment to make VAT payment in accordance with the tax credit method and the duration of stable application of the method of tax assessment stipulated in this article. (b) Business establishments voluntarily registering for application of the tax credit method shall comprise: - Enterprises and co-operatives currently operating and having an annual turnover of less than one billion Dong from sale of goods and provision of services and fully implementing the regime on accounting, invoices and source documents in accordance with the law on accounting, invoices and source documents; - Enterprises and co-operatives newly established from an investment project of a business establishment which currently operates and pays VAT in accordance with the tax credit method; - Newly established enterprises and co-operatives carrying out investment in or purchase of fixed assets, machinery and equipment and foreign organizations and individuals conducting business in Vietnam under a contract or sub-contract in accordance with guidelines provided by the Ministry of Finance; - Other economic organizations which can account for input and output VAT. (c) Foreign organizations and individuals who provide goods and services for the purpose of conducting operations being prospecting, exploration, development and exploitation of oil and gas [petroleum] fields shall make tax payment in accordance with the tax credit method and such tax payment shall be declared, withheld and made by the Vietnamese party on their behalf. Where a business establishment has activities of trading in the purchase and sale of gold, silver and precious stones and activities of creating products containing gold, silver or precious stones, then such business establishment must account separately for such activities for tax Allens - Vietnam Laws Online Database on 14

16 payment in accordance with the method of calculating tax directly on the basis of added value stipulated in article 8.1 of this Decree. 5. The Ministry of Finance shall provide specific guidelines stipulated in this article. Article 8 Method of calculating tax directly on the basis of added value The method of calculating tax directly on the basis of added value shall be implemented in accordance with article 11 of the Law on VAT and article 1.5 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT. 1. The amount of VAT payable by the method of calculating tax directly on the basis of added value equals the added value multiplied by the VAT rate of ten (10) per cent applicable to activities of trading in the purchase and sale of gold, silver and precious stones and activities of creating products containing gold, silver or precious stones. The added value of gold, silver or precious stones equals the output payment price of the gold, silver or precious stones less their corresponding input payment price. The payment price of gold, silver or precious stones equals the actual price recorded in the invoice for sale of gold, silver or stones, including remuneration for activities of creating products (if any), VAT and extra charges or sub-charges to which the seller is entitled The input payment price of gold, silver or precious stones equals the value of gold, silver or precious stones purchased or imported, including VAT applicable to the activities of trading in the purchase and sale of gold, silver or precious stones and activities of creating products containing gold, silver or precious stones sold. If within a tax assessment period a negative added value of gold, silver or precious stones arises, then it is permitted to offset such value against a positive added value of the gold, silver or precious stones. If a positive added value does not arise or if the positive added value is insufficient for offsetting the negative added value, then it may be carried forward in order to be deducted from added value in the following period of the year. At the end of a calendar year, a negative added value may not be carried forward to the next year. 2. The amount of VAT payable in accordance with the method of calculating tax directly on the basis of added value equals a percentage (%) multiplied by the turnover of the applicable [entity] as follows: (a) Applicable entities [comprise]: - Enterprises and co-operatives currently operating and having an annual turnover of less than one billion Dong, except for the cases of voluntary registration for application of the tax credit method stipulated in article 7.4 of this Decree; - Newly established enterprises and co-operatives, except for the cases of voluntary registration stipulated in article 7.4 of this Decree; - Business households and individuals; - Foreign organizations and individuals conducting business in Vietnam other than pursuant to the Law on Investment and other organizations which do not implement or fully Allens - Vietnam Laws Online Database on 15

17 implement the regime on accounting, invoices and source documents stipulated by law, except for foreign organizations and individuals who provide goods and services for the purpose of conducting operations being prospecting, exploration, development and exploitation of oil and gas [petroleum] fields stipulated in article 7.4(c) of this Decree; - Other economic organizations, except for the case of registration for tax payment in accordance with the tax credit method stipulated in article 7.4(b) of this Decree. Where a business establishment has activities of trading in the purchase and sale of gold, silver and precious stones and activities of creating products containing gold, silver or precious stones, it must account separately for these activities for making tax payment in accordance with the method of calculating tax directly on the basis of added value as stipulated in clause 1 of this article. (b) The percentage (%) of turnover as the basis for calculating VAT is regulated for each activity as follows: - Distribution and/or supply of goods: 1%; - Services and construction without the tender for provision of raw materials and supplies: 5%; - Manufacturing, transportation, services associated with sale of goods, and construction where the tender included provision of raw materials and supplies: 3%. - Other business activities: 2%. (c) Turnover for assessing VAT is the total sales of goods or services recorded in the invoice for sale of goods, including VAT and sub-charges or extra charges to which the business establishment is entitled. 3. In the case of business activities or business households which do not implement or fully implement the regime on accounting, invoices and source documents stipulated by law, VAT shall be paid on the basis of a fixed level of turnover as stipulated in article 38 of the Law on Tax Management. The Ministry of Finance shall provide specific guidelines on method of calculating tax directly on the basis of added value stipulated in this clause. CHAPTER 3 Tax Credit and Tax Refund Article 9 Credit of input value added tax Credit of input VAT shall be implemented in accordance with article 12 of the Law on VAT and article 1.6 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT. 1. Business establishments which pay VAT in accordance with the tax credit method are permitted to credit input VAT as follows: Allens - Vietnam Laws Online Database on 16

18 (a) (b) 16 Input VAT levied on goods and services used for production and business in value added taxable goods and services shall be fully credited, including input VAT not compensated [not recovered] applicable to value added taxable goods subject to loss and input VAT levied on goods and services forming fixed assets such as staff cafeterias, rooms for breaks by staff, changing rooms, garages, restrooms, clean water tanks serving employees in production or business areas and residential housing and clinics for workers working in industrial zones. In the case of input VAT levied on goods and services (including fixed assets) used for production and business in both value added taxable goods and services and non-taxable goods and services, only the amount of input VAT levied on the goods and services used for production and business in taxable goods and services shall be credited. Business establishments must separately account for creditable input VAT and for non-creditable input VAT, and if they are unable to do so then creditable input VAT shall be calculated as a ratio (%) being turnover of goods and services subject to VAT over total turnover from goods and services sold. The Ministry of Finance shall preside over co-ordination with other relevant ministries to guide determination of total turnover of goods and services sold as the basis for fixing the ratio of creditable VAT as prescribed in this clause and as appropriate for each sector. In the case of production and business establishments organizing a self-contained production [line], conducting concentrated cost accounting and using non-taxable products in stages for production of value added taxable goods, the input VAT levied in such stages shall be fully credited. In the case of production and business establishments having an investment project and implementing investment in various phases, including newly-established production and business establishments having a production and business plan and organising a selfcontained production [line], conducting concentrated cost accounting and using non-taxable products to produce value added taxable goods but providing non-taxable goods and services in the phase of investment in capital construction, the amount of input VAT in the phase of investment to form fixed assets shall be fully credited. The creditable amount of input VAT levied on goods and services not forming fixed assets shall be calculated as a ratio (%) being the value added taxable sales over the total sales of goods and services. In the case of production and business establishments having an investment project, including newly established production and business establishments, conducting investment in production and business in non-taxable goods and services and at the same time, investment in production and business in value added taxable goods and business, the amount of input VAT levied on fixed assets in the phase of investment in capital construction shall be temporarily credited in accordance with the ratio (%) of sales of value added taxable goods and services to the total sales of goods and services sold in accordance with the production and business plan of the business establishment, and the temporarily credited tax amount shall be adjusted in accordance with the ratio (%) of the sales of value added taxable goods and services to the total sales of goods and services sold in three years from the first year in which [the business establishment] has sales. 16 Allens footnote: As amended by Decree 12 dated 12 February 2015 by addition of the underlined phrases. Allens - Vietnam Laws Online Database on 17