Table Of Contents
1. VAT Refunds in Vietnam
Value Added Tax (VAT) is a consumption tax levied on the sale of goods and services in Vietnam. Understanding VAT is crucial for both businesses operating in Vietnam and foreign tourists visiting the country.
VAT Rates and Exemptions:
- Rates: Vietnam implements a multi-tier VAT system with three main rates:
- 0%: Applies to exports, specific services, and goods sold to duty-free shops.
- 5%: Reduced rate for essential goods like medicine, education services, and agricultural products.
- 10%: Standard rate for most goods and services.
- Exemptions: Necessities like food products, public transportation, and healthcare services are generally exempt from VAT.
VAT for Businesses:
- VAT Payment: Businesses registered under the credit method are responsible for paying VAT on taxable sales.
- VAT Refunds: Businesses can claim VAT refunds under specific circumstances, such as:
- Having a new investment project with unclaimed input VAT exceeding 300 million VND (~$11,800).
- Exporting goods/services and having unclaimed input VAT exceeding 300 million VND (limited to 10% of export revenue).
- Overpaying VAT or having uncredited input VAT due to company restructuring or closure.
- Participating in ODA projects or receiving non-refundable aid for humanitarian projects.
VAT for Tourists:
- Eligibility: Foreign tourists and overseas Vietnamese with valid passports can claim VAT refunds on qualifying purchases.
- Requirements:
- The minimum purchase value of 2 million VND (~$79) per invoice or combined invoices from the same store on the same day.
- Purchases made within 60 days of departure from Vietnam.
- Processing the refund at designated counters at international airports and seaports upon departure.
- Eligible Goods: Only unused, unopened goods purchased from VAT refund program-approved retailers are eligible.
- Documentation: Retain original VAT invoices for presentation at the refund counter.
Important Notes:
- The Vietnamese government may change VAT rates and regulations. It's recommended to stay updated on the latest information before claiming refunds.
- Currency conversion fees and exchange rate fluctuations might affect the final refund amount.
By understanding VAT in Vietnam, businesses can ensure proper compliance and potentially claim refunds. Tourists can maximize their savings by familiarizing themselves with eligibility criteria and procedures for claiming VAT refunds.
2. Required Documentation
Whether you're a business operating in Vietnam or a tourist visiting the country, understanding the required documentation for claiming VAT refunds is crucial. Here's a breakdown of the documents you'll need:
2.1. For Businesses:
- VAT Invoices: Detailed VAT invoices for all purchases and sales are essential. These invoices must clearly state the VAT amount paid or charged.
- Investment Project Documentation: Businesses claiming VAT refunds for new investment projects must provide documentation proving project approval and its current status.
- Export Documents: Businesses claiming VAT refunds on exports need proof of export in the form of customs declarations and shipping documents. Additionally, a list of customs declarations matching invoices issued to overseas customers may be required.
- Company Records: Depending on the reason for claiming a VAT refund, businesses may need to present contracts with overseas customers (including bank account information) and contracts with vendors for purchased goods and services.
- Financial Statements: Detailed financial statements highlighting the specific VAT amount you are claiming for a refund.
- Payment Receipts: Proof of payment for goods and services subject to VAT, along with proof of payment received from overseas customers (if applicable).
- Company Restructuring Documents: Any official letters or approvals related to mergers, acquisitions, or changes in your company structure might be required if claiming a VAT refund due to such events.
2.2. For Tourists:
- Passport and Entry Papers: Foreign tourists and overseas Vietnamese must present a valid passport or entry papers issued by a competent foreign agency.
- Original VAT Invoices: Retain the original VAT invoices for all purchases you intend to claim a refund on. These invoices will be presented along with the goods for inspection at the refund counter.
- Proof of Purchase: Ensure you have proof of purchase within the stipulated timeframe (typically 60 days before departure from Vietnam). Multiple invoices on the same day from the same store may be combined to meet the minimum purchase value.
Additional Notes:
- The Vietnamese government may have additional documentation requirements depending on specific circumstances. It's recommended to consult with a tax professional or relevant authorities for the latest updates.
- Keeping all documentation well-organized and readily available will streamline the VAT refund process.
By ensuring you have the necessary documentation in order, you can maximize your chances of a successful VAT refund claim in Vietnam.
3. VAT Refund Procedures
Claiming a VAT refund in Vietnam involves specific procedures depending on whether you're a business operating in the country or a tourist visiting. This guide outlines the essential steps for both parties.
For Businesses:
- Application Forms and Documents: Gather the necessary application forms like No. 01/HT. Prepare supporting documentation relevant to your claim, such as:
- Investment Projects: Investment Registration Certificate, Land Use Right Certificate (or similar), construction license, charter capital contribution certificate, and project management documentation (if applicable).
- Exported Goods: Detailed list of invoices and purchase evidence, list of customs declarations with clearance confirmations, and bank payment records for exported goods.
Online Submission
- The Vietnamese tax authorities now prefer online submissions for VAT refund applications. Use the official Tax portal to submit your complete VAT refund dossier.
Common Mistakes to Avoid:
- Project Timeline: Ensure your registered investment period aligns with the actual project completion to avoid issues with input VAT falling outside the timeframe.
- Project Requirements: Verify if your project meets all requirements for conditional business lines and obtain necessary sub-licenses.
- Capital Contribution: Maintain proof of full contribution of your registered charter capital.
- Record Keeping: Meticulously maintain accurate records for both business operations and investment projects to avoid compliance issues.
Processing Timeline:
- The VAT refund processing time can vary between 6 and 40 days from the date the tax authority acknowledges your application.
Dealing with VAT Audits:
- Organized Documentation: Keep all documentation readily available, including financial records, invoices, contracts, and payment proofs.
- Cooperation: Be responsive and cooperative during the audit process. Provide any requested information promptly.
- Discrepancy Resolution: Address any discrepancies or issues identified by the tax auditor promptly. Rectify errors and provide necessary documentation.
- Tax Professional: Consider engaging a tax professional to assist with complex transactions or significant VAT refund amounts.
For Tourists:
- Minimum Purchase & Eligibility:
- Tourists must spend at least VND 2 million (approximately USD 79) per invoice or combine invoices from the same store on the same day to qualify.
- Only unused, unopened goods purchased within 60 days of departure qualify.
- Participating Stores: Look for stores displaying the "VAT Refund for Tourists" logo to ensure your purchases are eligible for a refund.
- Required Documentation:
- Valid passport or entry papers
- Tax refund invoice from the participating store
- Original purchase receipts for refunded items
- Goods being claimed for a refund (in original packaging)
- Claiming Refunds at Departure:
- Locate the VAT refund counter at the international airport or seaport in the departure hall (before customs control).
- Submit your documentation (passport, tax refund invoice, purchase receipts) and present the goods for inspection by customs officers.
- Upon verification, the refund will be processed and issued either in cash or credited to your credit card (depending on the available options).
Refund Methods:
- Cash Refunds: Receive your refund immediately at the VAT refund counter.
- Credit Card Refunds: This option takes a few weeks to process but offers a secure and traceable method for receiving the refund.
4. Minimum Spending Requirements
Thresholds:
- VND 2 Million: To claim a VAT refund as a tourist in Vietnam, you must have made purchases with a minimum value of VND 2 million (approximately USD 79) per invoice or combined invoices from the same store on the same day.
- Varying Thresholds: The minimum spending requirement may vary slightly depending on the specific VAT refund program and the type of goods purchased.
Exclusions:
- Essential Items: Certain essential items, such as basic food products, may not be eligible for VAT refunds.
- Services: VAT refunds are generally not available for services, only for goods.
It's important to be aware of the minimum spending requirements to ensure that your purchases qualify for a VAT refund.
5. Refund Limits and Exclusions
Maximum Refund Amounts:
- Per Day or Per Trip: There may be maximum refund amounts set per day or per trip. This means that the total VAT refund you can claim may be limited, even if your total purchases exceed the minimum spending requirement.
- Check with Authorities: It's recommended to check with the relevant authorities or airport staff for the current maximum refund amounts.
Ineligible Goods:
- Essential Items: Certain essential goods, such as basic food products and medicine, may not be eligible for VAT refunds.
- Services: VAT refunds are generally not available for services, only for goods.
- Exported Goods: Goods that have already been exported from Vietnam are not eligible for VAT refunds.
It's important to understand the refund limits and exclusions to ensure that your purchases qualify for a VAT refund.
6. Currency Conversion and Fees
Currency Conversion:
- Vietnamese Dong: VAT refunds are typically issued in Vietnamese dong.
- Currency Exchange: You may need to convert the refund to your preferred currency.
- Exchange Rates: The exchange rate used for conversion may vary depending on the time of the refund.
Bank Charges:
- Processing Fees: Banks may charge fees for processing VAT refunds, especially if the refund is issued to a foreign bank account.
- Currency Conversion Fees: You may also incur fees for currency conversion.
Loss of Value:
- Currency Fluctuations: Due to currency fluctuations, the value of your VAT refund may decrease over time.
- Timing: It's advisable to claim your refund as soon as possible to minimize potential losses due to currency fluctuations.
It's important to be aware of the potential currency conversion fees and the possibility of loss of value due to exchange rate fluctuations.
7. Challenges and Tips
Common Challenges:
- Language Barriers: Language barriers can make it difficult to communicate with airport staff or government officials regarding VAT refunds.
- Documentation: Ensuring that you have all the necessary documentation, such as purchase receipts and customs declaration forms, can be challenging.
- Processing Time: The VAT refund process may take time, and there can be delays due to administrative procedures or system issues.
- Currency Conversion: Currency conversion fees and potential losses due to exchange rate fluctuations can be a concern.
Tips for a Successful Refund Claim:
- Plan: Research the VAT refund process and prepare the necessary documentation before your trip.
- Keep Organized: Organize your purchase receipts and other documents carefully.
- Time Management: Allow sufficient time at the airport for the VAT refund process to avoid missing your flight.
- Communication: Be clear and concise when communicating with airport staff or government officials.
- Translation Services: Consider using translation services if you have difficulty communicating in Vietnamese.
- Patience: The VAT refund process may take time, so be patient and persistent.
By being prepared and understanding the potential challenges, you can increase your chances of a successful VAT refund claim.