Circular No. 129/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance guiding the implementation of a number of articles of the Value-Added Tax Law and guiding the implementation of the Government’s Decree No. 123/2008/ND-CP of December 8, 2008, detailing and guiding the implementation of a number of articles of the Value-Added Tax Law
THE MINISTRY OF FINANCE
SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
Hanoi, December 26, 2008
GUIDING THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE VALUE-ADDED TAX LAW AND GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE NO. 123/2008/ND-CP OF DECEMBER 8, 2008, DETAILING AND GUIDING THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE VALUE-ADDED TAX LAW
Pursuant to Value-Added Tax Law No. 13/2008/QH12 of June 3, 2008;
Pursuant to Tax Administration Law No. 78/2006/QH11 of November 29, 2006;
Pursuant to the Government’s Decree No. 123/2008/ND-CP of December 8, 2008, detailing and guiding the implementation of a number of articles of the Value-Added Tax Law;
Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Finance Ministry;
The Finance Ministry guides implementation of value-added tax (VAT) as follows:
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A. SCOPE OF APPLICATION
I. TAXABLE OBJECTS AND TAXPAYERS
1. Taxable objects
Liable to VAT are goods and services used for production, business and consumption in Vietnam (including goods and services purchased from organizations and individuals abroad), except for those not liable to VAT specified in Section II, Part A of this Circular.
VAT payers are organizations and individuals producing and trading in VAT-liable goods and services in Vietnam, regardless of their business lines, forms and organization (below referred to as business establishments) and organizations and individuals that import goods or purchase services liable to VAT from abroad (below referred to as importers), including:
2.1. Business organizations established and registering business under the Law on Enterprises, the Law on State Enterprises (now the Law on Enterprises) or the Law on Cooperatives;
2.2. Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, people’s armed forces units, non-business organizations and other organizations;
2.3. Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam (now the Law on Investment); foreign organizations and individuals conducting business activities in Vietnam without establishing legal entities in Vietnam;
2.4. Individuals, households, independent groups of business people and other business entities conducting in production, business or import activities.
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2.5. Organizations and individuals that conduct production or business in Vietnam and purchase services (including services associated with goods) from foreign organizations without permanent establishments in Vietnam or overseas individuals who do not reside in Vietnam.
II. NON-TAXABLE OBJECTS
1. Products of cultivation (including products from plantation forests) and husbandry, cultured and fished aquatic and marine products which have not yet been processed into other products or have just been preliminarily processed then sold by producing or fishing organizations or individuals themselves and at the stage of importation.
Products preliminarily processed by ordinary methods are those which have just been cleaned, sun-dried, heat-dried, peeled, pitted, sliced, salted, chilled or otherwise ordinarily preserved.
Example 1: Sun-drying, heat-drying, peeling, pitting or slicing of cultivation products; cleaning, sun-drying, heat-drying, salting or icing of cultured or fished aquatic and marine products.
2. Products being breeding animals and plant varieties, such as breeding eggs and animals, saplings, seeds, sperms, embryos, genetic materials at the stages of rearing, importation and trading. Products that are breeding animals and plant varieties not liable to VAT are those imported and traded by establishments which have been granted breeding animal or plant variety business registration certificates by state management agencies. Products that are breeding animals or plant varieties subject to quality standards promulgated by the State must satisfy the State-prescribed conditions.
3. Water irrigation and drainage; soil plowing and harrowing; intra-field canal and ditch dredging for agricultural production; services of harvesting farm produce.
4. Salt products made from seawater, natural rock salt, refined salt and iodized salt, the principal component of which has the chemical formula NaCI.
5. State-owned residential houses sold by the State to their current tenants.
6. Transfer of land use rights.
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7. Life insurance covering human health insurance and accident insurance in a life insurance package; student insurance and such person insurance services as sailor or crew member accident insurance, person accident insurance (including also insurance for accidents, life and combined hospitalization), passenger accident insurance, tourist insurance, accident insurance for drivers and driver assistants and persons aboard vehicles, insurance for sterilized persons, insurance of allowance for surgical operations, insurance for individuals’ lives, insurance for electricity users and other kinds of insurance related to humans; insurance for livestock, plants, other agricultural insurance services; reinsurance.
8. Financial services:
a/ Credit provision services, covering provision of loans, discount and rediscount of negotiable instruments and other valuable papers; guarantee; financial leasing and other lawful forms of credit provision by Vietnam-based financial and credit institutions.
b/ Securities trading activities, including securities brokerage, securities dealing, securities issuance underwriting, securities investment counseling, securities depository, securities investment fund and portfolio management, market organization services provided by stock exchanges or securities trading centers, and other business activities specified by the securities law.
Market organization services provided by stock exchanges or securities trading centers include listing acceptance, listing management, trading management, trading member management, supply of information relating to listing management, trading management, and other relevant services.
c/ Capital transfer covers the transfer of part or the whole of the invested capital amount, including the sale of enterprises to other enterprises for production and business; securities transfer; and other forms of capital transfer under law.
d/ Derivative financial services, including interest rate swap, forward contracts, future contracts, foreign currency put and call options and other derivative financial services under law.
9. Healthcare and animal health services, including medical examination and treatment and preventive medicine services for humans and livestock, birth control services, health convalescence and functional rehabilitation services for patients. Healthcare services cover also transportation of patients, lease of patient rooms and beds of medical establishments; test, screening, radiograph, blood and blood preparations for patients.
10. Public-utility post and telecommunications services and Internet services universalized under the Government’s programs; post and telecommunications services provided from abroad to Vietnam (incoming services).
11. Public services, including sanitation and water drainage in streets and residential quarters; maintenance of zoos, flower gardens, parks and greeneries along streets and public lighting; and funeral services. Services mentioned at this Point are irrespective of their funding sources.
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a/ Public services of sanitation and water drainage in streets and residential quarters cover activities of collecting and disposing of garbage and wastes; draining and treating wastewater. Sanitary and water drainage services, such as cleaning and sanitizing offices of organizations and individuals provided by business establishments are liable to VAT.
b/ Maintenance of zoos, flower gardens, parks and greeneries along streets covers activities of managing, planting, tending trees and protecting birds, animals in parks, zoos, public places and national parks.
c/ Public lighting means lighting of streets, lanes and alleys in residential areas, flower gardens and parks.
d/ Funeral services provided by establishments with the function of providing funeral services cover activities of leasing houses, hearses and cars in service of funeral, burial, cremation and disinterment.
12. Maintenance, repair and construction of cultural, art and public-utility works, infrastructures and gratitude houses for social policy beneficiaries funded with people’s contributions and humanitarian aid.
For maintenance, repair or construction of works, which is funded with capital other than people’s contributions (including contributed amounts and financial supports of organizations and individuals) and humanitarian aid, not exceeding 50% of the total capital used for those works, the whole value of the works is not liable to tax.
Social policy beneficiaries include people with meritorious services under the law on people with meritorious services; social relief beneficiaries who enjoy state budget allowances; members of households classified as poor or living just above the poverty line; and other cases provided for by law.
13. Teaching and vocational training specified by law, including also teaching of foreign languages, informatics, dancing, singing, painting, music, drama, circus, physical training, sports, child nursing, and other jobs in order to train, retrain and raise the educational levels and professional knowledge.
For education establishments from pre-schools to upper secondary schools that collect charges for meals of their pupils, these charges are not liable to VAT.
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14. Radio and television broadcasting funded with the state budget.
15. Publication, import and distribution of newspapers, magazines and specialized bulletins, political books, textbooks, teaching course books, law books, scientific and technical books, books printed in ethnic minority languages, and pictures, photos and posters for propaganda and mass agitation purposes, including those recorded in audio-visual tapes and disks or encrypted into electronic data; printing of banknotes.
Newspapers, magazines and specialized bulletins, including also transmission of their pages.
Political books are books disseminating the political line of the Party and the State, serving political tasks under specific themes or topics, serving anniversaries or traditional days of organizations, levels, branches and localities; statistical books, books propagating the good people and good deeds movement; books of speeches, research and theoretical papers of Party and State leaders.
Textbooks (including those recorded in audio-visual tapes and disks or encrypted into electronic data) are books used for teaching and learning at the levels from preschool to upper secondary school (including reference books for teachers and pupils, relevant to the contents of education curricula).
Teaching course books are books used for teaching and learning in universities, colleges, professional secondary and vocational training schools.
Law books are books of legal documents of the State.
Scientific and technical books are books used for introducing and guiding scientific and technical knowledge directly related to production and various scientific and technical branches.
Books printed in ethnic minority languages also include books printed bilingual in Vietnamese and an ethnic minority language.
Propaganda and mass agitation pictures, photos and posters are pictures, photos, posters, leaflets and brochures used for propaganda and mass agitation purposes, slogans, leaders’ pictures, the Party’s flag, the national flag, the Youth Union’s flag, the Young Pioneers League’s flag.
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Audio or video tapes and disks recorded with the contents of newspapers, magazines, specialized bulletins or books specified at this Point.
16. Mass transit by bus and tramcar means public transportation of passengers by bus or tramcar along specified routes within provinces, urban centers and in their vicinities under the Transport Ministry’s regulations.
17. Goods which cannot be produced at home and imported in the following cases:
a/ Machinery, equipment and supplies imported for direct use in scientific research and technological development activities;
b/ Machinery, equipment, spare parts, special-purpose means of transport and supplies which need to be imported to serve activities of prospecting, exploring and developing oil and gas fields;
c/ Aircraft (including aircraft engines), derricks and ships imported to form fixed assets of enterprises or hired from abroad for production, business or lease.
In order to identify goods not liable to VAT at the stage of importation specified at this Point, importers shall produce to customs offices documents under the Finance Ministry’s guidance on customs procedures; customs inspection and supervision; import and export duties and tax administration regarding imports and exports.
The Planning and Investment Ministry shall promulgate the list of machinery, equipment and supplies which can be produced at home, for use in distinguishing them from those which cannot be produced at home and need to be imported for direct use in scientific research and technological development; the list of machinery, equipment, spare parts, special-purpose means of transport and supplies which can be produced at home, for use in distinguishing them from those which cannot be produced at home and need to be imported for prospecting, exploring and developing oil and gas fields; and the list of aircraft, derricks and ships which can be produced at home, for use in distinguishing them from those which cannot be produced at home and need to be imported to form fixed assets of enterprises or hired from abroad for production, business or lease.
18. Weaponry and military equipment for exclusive use in defense and security.
a/ Non-taxable weaponry and military equipment for exclusive use in defense and security guided at this Point are those on the list of weaponry and military equipment for exclusive use in defense and security promulgated by the Finance Ministry after reaching agreement with the Defense Ministry and the Public Security Ministry.
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Weaponry and military equipment not liable to VAT as guided at this Point must be finished products in complete sets or parts, accessories and packages used exclusively for assembling and preserving finished products. When weaponry and military equipment used exclusively in defense and security need to be repaired, their repair services provided by enterprises of the Defense Ministry or the Public Security Ministry are not liable to VAT.
b/ Weaponry and military equipment (including supplies, machinery, equipment and spare parts) used exclusively in service of defense and security are, when imported, exempt from import duty under the Import Tax and Export Tax Law, or are, when imported within annual quotas approved by the Prime Minister, not liable to VAT.
Dossiers and procedures for the import of weaponry and military equipment which are not liable to VAT at the importation stage comply with the Finance Ministry’s guidance on customs procedures; customs inspection and supervision; import and export duties and tax administration regarding imports and exports.
19. Imported goods and goods and services sold to organizations and individuals for use as humanitarian or non-refundable aid in the following cases:
a/ Goods imported for use as humanitarian aid or non-refundable aid goods with the Finance Ministry’s certification;
b/ Gifts given under the law on gifts and presents for state agencies, political organizations, socio-political organizations, political-socio-professional organizations, social organizations, socio-professional organizations or people’s armed forces units;
c/ Presents and gifts given under the law on gifts and presents to individuals in Vietnam;
d/ Personal effects of foreign organizations and individuals within diplomatic immunity limits under the law on diplomatic immunities; and personal effects brought along by overseas Vietnamese upon their return to the country;
e/ Personal effects within duty-free luggage limits;
The quota quantities of imported goods not liable to VAT at the importation stage are equal to the import duty-free quantities prescribed in the Import Tax and Export Tax Law and guiding documents.
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Goods imported by organizations and individuals entitled to diplomatic immunities under the Ordinance on Diplomatic Immunities are not liable to VAT. If these organizations or individuals purchase goods and services in Vietnam and pay VAT thereon, they will be refunded paid VAT amounts under the guidance at Point 7, Part C of this Circular. The subjects, goods and procedural dossiers for enjoying VAT exemption guided at this Point comply with the Finance Ministry’s guidance on the refund of VAT to diplomatic missions, consular offices and representative agencies of international organizations in Vietnam.
Dossiers and procedures for handling imported goods which are not liable to VAT at the importation stage comply with the Finance Ministry’s guidance on customs procedures; customs inspection and supervision; import and export duties and tax administration regarding imports and exports.
f/ Goods and services sold to foreign organizations or individuals or international organizations for use as humanitarian aid or non-refundable aid to Vietnam.
The procedure for international organizations or foreigners to purchase goods and services in Vietnam for use as humanitarian aid or non-refundable aid to Vietnam and enjoy VAT exemption: International organizations or foreigners shall send to the sellers documents clearly stating the names of the international organizations or foreigners purchasing goods for use as humanitarian aid or non-refundable aid to Vietnam, the quantity or value of the purchased goods; and written certification by the Finance Ministry of such aid.
When selling these goods, the business establishments shall issue invoices as guided in Section IV, Part B of this Circular, clearly indicating on these invoices that the goods are sold to foreign organizations or individuals or international organizations for use as non-refundable aid or humanitarian aid and not liable to VAT, and keep the above-said documents of international organizations or Vietnamese representative agencies for tax declaration.
20. Goods transported from/to border gate under customs supervision, transited through the Vietnamese territory; goods temporarily imported for re-export, goods temporarily exported for re-import; raw materials imported for production or processing of goods for export under export production or processing contracts signed with foreign parties.
Goods and services that are sold and purchased between foreign countries and non-tariff zones and among non-tariff zones.
Non-tariff zones include export processing zones, export processing enterprises, bonded zones, bonded warehouses, special commercial and economic zones, commercial and industrial zones and other economic zones established and enjoying tax incentives like non-tariff zones under the Prime Minister’s decisions. Goods purchase, sale and exchange relations between these zones and outside areas are import and export relations.
Dossiers and procedures for the determination and non-collection of VAT in these cases comply with the Finance Ministry’s guidance on customs procedures; customs inspection and supervision; import and export duties and tax administration regarding imports and exports.
21. Technology transfer under the Technology Transfer Law; assignment of intellectual property rights under the Intellectual Property Law. For contracts on technology transfer accompanied by machinery and equipment transfer, only the value of transferred technology or assigned intellectual property rights is not liable to VAT. If the value of transferred technology or assigned intellectual property rights cannot be separated, VAT will be imposed on both the value of transferred technology or assigned intellectual property rights and that of machinery and equipment.
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Computer software includes software products and software services as specified by law.
22. Gold imported in the form of bar or ingot and gold not yet fashioned into fine-art articles, jewelry or other products.
Gold in the form of bar or ingot and unfashioned gold shall be determined under legal provisions on gold management and trading.
23. Export products that are unprocessed exploited natural resources and minerals.
Unprocessed exploited natural resources and minerals are those not yet processed into other products, including also minerals already screened, sorted or treated for higher concentrations or other natural resources already cut or split.
24. Artificial products used for substitution of diseased people’s organs, including also those being body parts for permanent implantation in human bodies; crutches, wheelchairs and other tools used exclusively for people with disabilities.
25. Goods and services of business individuals with average monthly incomes lower than the common minimum salary level applicable to domestic organizations and enterprises under the Government’s regulations on region-based minimum salary levels applicable to employees of companies, enterprises, cooperatives, cooperation groups, farms, households, individuals and other Vietnamese organizations.
26. The following goods and services:
a/ Goods for duty-free sale at duty-free shops under the Prime Minister’s regulations.
b/ National reserve goods sold by the National Reserves.
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c/ Services for which charges or fees are collected by the State under the law on charges and fees.
d/ Sweeping of bombs, land mines and explosive objects performed by defense units at projects invested with state budget capital.
Any change in the use purposes of goods not liable to VAT at the importation stage must be declared for VAT payment at the importation stage under regulations to customs offices where customs declarations are registered. VAT will be calculated from the time of change of the use purposes. Organizations and individuals that sell goods on the domestic market shall declare and pay VAT to tax offices directly managing them under regulations.
B. TAX BASES AND TAX CALCULATION METHODS
The bases for calculating VAT are taxable price and tax rate.
I. TAXABLE PRICES
1. Taxable prices of goods or services are specified as follows:
1.1. For goods and services sold or provided by production and business establishments, their taxable prices are VAT-exclusive sale prices. For goods and services subject to excise tax. Their taxable prices are sale prices inclusive of excise tax but exclusive of VAT.
The taxable prices of goods or services cover also additional levies and surcharges collected in addition to the goods or service prices which are enjoyed by business establishments, excluding those which business establishments shall remit into the state budget. When business establishments apply reduced sale prices or commercial discounts for their customers (if any), taxable prices are reduced or commercially discounted sale prices for customers.
1.2. For imported goods, their taxable prices are import prices at border gates plus (+) import duty (if any) and plus (+) excise tax (if any). Import prices at border gates are determined according to regulations on dutiable prices of imported goods.
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For imported goods eligible for import duty exemption or reduction, their taxable prices are import prices plus (+) import duty to be paid after the exemption or reduction.
1.3. For goods and services used for barter, internal consumption, presentation as gifts, donation or payment of salaries to laborers, their taxable prices are taxable prices of goods or services of the same or similar types at the time such activities are carried out.
Goods and services used for internal consumption are those manufactured or provided by business establishments for their internal consumption, excluding those for further use in their manufacture or business operations.
Goods for internal circulation, including those ex-warehoused for transfer from one warehouse to another, or supplies or semi-finished products ex-warehoused for further use in manufacture operations of a production or business establishment are not subject to VAT calculation and payment.
Example 2: Establishment A manufactures electric fans and installs 50 fans at its workshops, the sale price (exclusive of VAT) of this type of fans is VND 1,000,000/fan. The output VAT amount payable for these internally used fans is:
VND 1,000,000/fan x 50 fans x 10% = VND 5,000,000
Example 3: Establishment B produces garments and has a yarn workshop and a sewing workshop. If it transfers finished yarn from the yarn workshop to the sewing workshop for further use in the production process, it is not required to calculate and pay VAT for the yarn quantities ex-warehoused to the sewing workshop.
Example 4: Production establishment C is engaged in both manufacturing livestock feeds and raising cattle. VAT shall be imposed on the manufactured livestock feed quantity put for sale but establishment C is not required to calculate and pay VAT on its livestock feed quantity used for cattle raising which is not liable to VAT. The creditable input VAT amount on livestock feed manufacture operations shall be allocated according to the ratio of livestock feed sale turnover to the total of livestock feed sale turnover and livestock sale turnover.
1.4. For services of leasing such assets as houses, offices, workshops, warehouses, wharves, yards, means of transport, machinery, equipment, etc., their taxable prices are VAT-exclusive rents.
In case of leasing with rent paid in installments or prepaid for a leasing term, the taxable price is each VAT-exclusive rent installment or prepaid rent amount for that leasing term.
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In case of lease of foreign machinery, equipment or means of transport which cannot be manufactured at home for sub-lease, the taxable price is exclusive of the rent payable to the foreign party.
Asset rent rates are those agreed upon by involved parties and stated in their contracts. When a rent rate bracket is prescribed by law, rent rates must be within that bracket.
1.5. For goods sold on installment or deferred payment, their taxable prices are lump-sum VAT-exclusive sale prices, excluding interests on installment or deferred payments.
Example 5: A motorbike trading company sells 100 cc Honda motorbikes. The VAT-exclusive installment sale price of these motorbikes is VND 25.5 million (including an installment payment interest of VND 0.5 million). The taxable price is VND 25 million.
16. For goods processing, taxable prices are VAT-exclusive processing prices under processing contracts, consisting of remunerations, costs of fuel, power, auxiliary materials and other expenses for the processing operation.
17. For construction and installation, the taxable price is the VAT-exclusive value of the completed and handed over work, work item or job.
1.7.1. For cases of construction and installation involving the contracted supply of materials, taxable prices are construction and installation prices inclusive of the VAT-exclusive value of materials.
Example 6: Construction company B enters into a work construction contract, covering also the value of construction materials. The VAT-exclusive total payment value is VND 1,500 million, of which the VAT-exclusive value of construction materials is VND 1,000 million. Then the taxable price is VND 1,500 million.
1.7.2. For cases of construction and installation without the contracted supply of materials, the taxable price is the construction and installation value exclusive of the VAT-exclusive value of materials.
Example 7: Construction company B enters into a work construction contract not covering the value of construction materials. If the total VAT-exclusive value of the work is VND 1,500 million and the VAT-exclusive value of construction materials supplied by investor A is VND 1,000 million, then the taxable price in this case is VND 500 million (VND 1,500 million - VND 1,000 million).
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1.7.3. For cases of construction and installation with payments to be made for each completed and taken-over construction item or based on the value of the completed and taken-over construction and installation volume, the taxable price is the VAT-exclusive value of the completed and taken-over construction item or work volume.
Example 8: Textile company X (party A) hires construction company Y (party B) to perform construction and installation work to expand a workshop.
The total VAT-exclusive value of the work is VND 200 billion, including:
- The construction and installation value: VND 80 billion
- The value of equipment supplied and installed by party B: VND 120 billion.
- VAT amount 10%: (80 + 120) x 10% = VND 20 billion.
- Total amount payable by party A: VND 220 billion:
- Party A shall:
+ Receive the workshop handed over, account it as an increase of VND 200 billion (VAT-exclusive value) in the value of its fixed assets for depreciation purpose.
+ Declare and credit the VAT amount of VND 20 billion against the output VAT on sold goods or request tax refund under regulations.
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If party A tests, takes over the work and accepts to make payment to party B per construction item (presuming that a VND 80-billion construction and installation volume is tested, taken over and paid for first) then the taxable price is VND 80 billion.
1.8. For real estate business activities, taxable prices are real estate transfer prices minus (-) actual land prices (or land rent rates) at the time of land transfer. In case land prices at the time of transfer declared by taxpayers are not reliable for determining reasonable taxable prices under law, land prices to be subtracted (or land rent rates) are those set by provincial/municipal People’s Committees at the time of real estate transfer. Land prices to be subtracted for determining taxable prices must not exceed sums of money collected from land customers.
For establishments building and trading in infrastructure works or building houses for sale or transfer and collecting sums of money from customers according to the project implementation or payment collection schedules indicated in contracts, land prices to be subtracted are actual land prices at the time of first collection according to schedule. Land prices to be subtracted shall be calculated according to the ratio (%) of sums of money collected according to project implementation or payment collection schedules indicated in the contracts to actual land prices at the time of transfer (the time of first collection according to the project implementation or payment collection schedule).
Example 9: Housing Investment and Development Company A is allocated by the State 10,000 m2 of land for building houses for sale. The company sells one house on a land area of 100 m2 at a total of VND 2 billion, exclusive of VAT, including the house sale price and land use rights transfer price (of which the price of the house with infrastructure works is VND 1.2 billion and the land use rights transfer price declared by the Company is VND 8 million per m2).
The managing tax office holds that the price declared by the Company is insufficient for determining a reasonable taxable price under law.
At the time of transfer, the land price set by the local People’s Committee is VND 6 million per m2, then the taxable price of the above house is:
VND 2 billion - (VND 6 million x 100/m2) = VND 1.4 billion.
The output VAT is: VND 1.4 billion x 10% = VND 140 million
Example 10: Real Estate Business Company C sells a villa at the price of VND 8 billion as stated in the transfer contract, including the villa sale price of VND 5 billion and the land price of VND 3 billion. Company C collects the payment according to the project implementation schedule. The customer makes the payment in three installments. The first installment is 30% of the contract value (VND 2.4 billion), the second installment is 50% of the contract value (VND 4 billion) and the third installment is the remaining 20% (VND 1.6 billion), the taxable price for each installment is as follows:
The taxable price for the first installment:
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VND 2.4 billion - 30% x VND 3 billion = VND 1.5 billion
The taxable price for the second installment:
VND4 billion - 50% x VND 3 billion = VND 2.5 billion
The taxable price for the third installment:
VND 1.6 billion - 20% x VND 3 billion = VND 1 billion
- For business establishments leased land by the State for building infrastructure works for lease, taxable prices are VAT-exclusive infrastructure lease rates minus (-) land rents to be remitted into the state budget.
Example 11: Industrial Park Infrastructure Investment and Dealing Company Y is leased by the State 500,000 m2 of land for 50 years for building technical infrastructure works for lease. The land rent rate is VND 300,000/m2/year. After building infrastructure works, company Y leases 5,000 m2 to company Z for 20 years for building a factory at a VAT-exclusive land rent rate (excluding public-facility charges) of VND 800,000/m2/year. Company Z pays the infrastructure rent once a year.
The taxable price for an annual rent from the lease of the infrastructure is:
(5,000 m2 x VND 800,000) - (5,000 m2 x VND 300,000) x 1 year = VND 2,500,000,000.
The VAT amount is: VND 2,500,000,000 x 10% = VND 250,000,000.
1.9. For goods and service sale and purchase agency and brokerage activities, remunerated or commissioned import or export consignment activities, taxable prices are VAT-exclusive remunerations or commissions earned from these activities.
1.10. For goods and services with payment documents showing VAT-inclusive payment prices, such as stamps, freight or fare tickets or construction lottery tickets, their VAT-exclusive prices shall be determined as follows:
VAT- exclusive price
Payment price (ticket or stamp price)
1 + VAT rate of the goods or service (%)
1.11. For electricity supplied by hydropower plants being dependent-accounting units of the Vietnam Electricity Group, the taxable price for determining payable VAT amounts in a locality where such a plant is located is equal to 60% of the VAT-exclusive average commercial electricity sale price in the previous year. In case the average commercial electricity sale price in the previous year cannot be determined, a price for temporary VAT calculation announced by the Group may apply but must not be lower than the price of the preceding year. If the average commercial electricity sale price in the previous year can be determined, declarations for difference adjustment shall be made in the declaration period of the month when the official price is available. The determination of the average commercial electricity sale price in a year must be made before March 31 of the following year.
1.12. For casino, prized video game or betting game services, taxable prices are excise tax-inclusive sums of money earned from these activities minus prizes paid to customers.
The taxable price shall be calculated according to the following formula:
Earned sum of money
1 + tax rate
Example 12: In a tax period, a casino service establishment records the following Figures:
- Cash amount collected from customers for token exchange at counters before playing games: VND 43 billion.
- Cash amount paid to customers for tokens returned after playing games: VND 10 billion.
Cash amount actually collected by the establishment: VND 43 billion - VND 10 billion = VND 33 billion.
The cash amount of VND 33 billion is the establishment’s turnover inclusive of VAT and excise tax.
The taxable price is calculated as follows:
VND 33 billion
VND 30 billion
1 + 10%
1.13. For transportation, loading and unloading, taxable prices are VAT-exclusive freight or loading and unloading charge rates, regardless of whether establishments directly undertake the transportation, loading and unloading or hire such service.
1.14. For tourist services in the form of tours under contracts signed with tourists at package prices (inclusive of meal, accommodation and travel), these package prices are regarded as VAT-inclusive prices.
In case the package price covers also air fares for tourists coming from abroad into Vietnam and from Vietnam to abroad, expenses for meals, lodgings and sight-seeing and some other expenses incurred abroad (if with lawful receipts), sums of money collected from tourists to cover these expenses may be subtracted from taxable prices (turnover).
Example 13: The Ho Chi Minh City Tourist Company performs a package tour contract with Thailand for 50 tourists for five days in Vietnam with a total payment of USD 32,000. The Vietnamese side has to pay for airfares, meals, accommodation, and sight-seeing tours under the agreed program, of which the airfares from Thailand to Vietnam and vice versa cost USD 10,000. The applicable USD/VND exchange rate is 1/17,000.
The taxable price under this contract is determined as follows:
+ Turnover liable to VAT is:
(USD 32,000 - USD 10,000) x VND 17,000 = VND 374,000,000
+ The taxable price is:
1 + 10%
Example 14: Hanoi Tourist Company performs a contract for taking tourists from Vietnam to China on a five-day tour at the package price of USD 400/person. If it has to pay a Chinese tourist company USD 300/person, its taxable turnover is USD 100/person (USD 400 - USD 300).
1.15. For pawning service, taxable prices are amounts to be collected from this service, including interests receivable from pawn loans and other proceeds from the sale of pawned articles (if any).
Revenues from this service, which are determined as above, are VAT-inclusive prices.
Example 15: A pawning company generates in the tax period a pawning turnover of VND 110 million.
+ The taxable price is determined as follows:
VND 110 million
VND 100 million
1 + 10%
1.16. For VAT-liable books sold at their distribution prices (cover prices) under the Publication Law, these sale prices shall be determined as VAT-inclusive prices for calculating selling establishments’ VAT and turnover. For books which are sold at prices other than their cover prices, VAT shall be calculated on the basis of actual sale prices.
1.17. For printing activities, taxable prices are printing costs. If a printing establishment performs printing contracts with payment prices covering also printing and paper costs, the taxable price also includes the paper cost.
1.18. For services of assessment agency, agency for indemnity consideration, agency for claim for compensations by third parties and agency for handling of wholly compensated goods for remunerations or commissions, taxable prices are earned VAT-exclusive remuneration or commission amounts (not yet subtracted with any expenses) collected by the insurance enterprises.
Taxable prices shall be calculated in Vietnam dong. If taxpayers have foreign-currency turnover, they shall convert it into Vietnam dong at the average inter-bank exchange rate announced by the State Bank of Vietnam at the time of turnover generation, for determining taxable prices.
2. The time of determining VAT is as follows:
- For sale of goods, it is the time of transfer of the right to own or use goods to purchasers, regardless of whether sellers have collected the money.
- For provision of services, it is the lime of completing service provision or the time of billing the service provision, regardless of whether providers have collected the money.
- For supply of electricity and clean water, it is the date of recording water or electricity meter readings for writing on water or electricity bills.
- For activities of dealing in real estate, building infrastructure or houses for sale, transfer or lease, it is the time of collection of money according to project implementation or payment collection schedules stated in contracts. Based on collected sums of money, business establishments shall declare output VAT amounts arising in the period.
- For construction and installation, it is the time of takeover test and handover of completed works, work items, construction or installation volumes, regardless of whether contractors have collected the money.
- For imported goods, it is the time of registration of customs declarations.
II. VAT RATES
VAT rates for goods and services are applied as follows:
1. The tax rate of 0% is applicable to exported goods and services; construction and installation of works of export processing enterprises; goods sold to duty-free shops; international transportation; exported goods and services not liable to VAT (except for cases not subject to the tax rate of 0% specified at Point 1.3 of this Section.
1.1. Exported goods and services:
a/ Exported goods include:
- Goods exported abroad, including those exported under consignment;
- Goods sold into non-tariff zones under the Prime Minister’s regulations; goods sold to duty-free shops;
- Goods treated as exports under the commercial law:
+ Intermediary processed goods under the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign parties.
+ Processed goods for on-spot export under the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign parties.
+ Goods exported for sale at overseas fairs and exhibitions.
b/ Exported services include services provided directly to overseas organizations and individuals or those in non-tariff zones.
Overseas organizations are foreign organizations without permanent establishments in Vietnam and being non-VAT payers in Vietnam;
Overseas individuals are foreigners not residing in Vietnam and overseas Vietnamese not present in Vietnam during the provision of services;
Organizations and individuals with business registrations in non-tariff zones, and other cases specified by the Prime Minister.
c/ Other goods and services:
- Construction and installation of works of export processing enterprises.
- International transportation means transportation of passengers, luggage and cargoes along international routes from Vietnam to abroad or from abroad to Vietnam. In case an international transportation contract covers also a domestic stage, international transportation covers also transportation along domestic routes;
- Goods and services not liable to VAT upon their exportation, except for cases not subject to the tax rate of 0% specified at Point 1.3 of this Section;
- Aircraft and seagoing ship repair services provided to foreign organizations and individuals.
1.2. Exported goods or services eligible for the tax rate of 0% must meet the following conditions:
- Having a contract on sale or processing of export goods; contract on entrusted export or entrusted processing of export goods; contract on service provision with overseas organizations and individuals or those in non-tariff zones;
- Having documents of via-bank payment for exported goods or services and other documents under law;
- Having customs declarations for export goods.
Particularly for aircraft and seagoing ship repair services provided to foreign organizations and individuals, to be eligible for the tax rate of 0%, aircraft and seagoing ships must, apart from meeting the above conditions, go through import procedures upon their entry into Vietnam and export procedures upon completion of repair.