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DRAFT NO. 2 OF THE DECREE DETAILING THE IMPLEMENTATION OF CERTAIN PROVISIONS OF THE VALUE-ADDED TAX LAW

Recently, the Government’s Electronic Information Portal announced Draft No. 2 of the Decree detailing the implementation of certain provisions of the Value-Added Tax Law, which includes the following noteworthy points:

1/ Goods and services purchased for 5 million VND or more must have non-cash payment documentation.

Article 10 of this decree stipulates that the conditions for input value-added tax (VAT) deduction require businesses to have non-cash payment documentation for purchased goods and services (including imported goods) valued at 5 million VND or more, inclusive of VAT.

Specific cases where non-cash payment documentation is not required are essentially inherited and adjusted from Article 15 of Circular 219/2013/TT-BTC (amended and supplemented by Circular 26/2015/TT-BTC). However, the following additional cases have been included:

  • Payment for goods and services using shares or bonds: If this payment method is explicitly stated in the contract, a written sales contract must be established beforehand.
  • Authorized payments by employees: If a business entity authorizes an individual employee to make payments for purchased goods and services, and subsequently reimburses that employee, the business is allowed to deduct input VAT, provided the goods and services are used for the entity’s production and business activities.

2/ Conditions for Input Value-Added Tax (VAT) Deduction for Goods Exported via Foreign E-Commerce Platforms and Other Specific Case

For goods exported via foreign e-commerce platforms: The exporting entity must provide documentation proving the sale of goods outside Vietnam, such as:

  • Contract signed with the e-commerce platform for selling goods on foreign e-commerce platforms.
  • Sales invoice for the exported goods.
  • Non-cash payment documentation as required by law (in cases where the exporting entity authorizes an intermediary – such as e-commerce platform – to collect payments from foreign customers, the authorization must be stipulated in the contract with the e-commerce platform).
  • Customs declaration that has completed customs procedures, in accordance with customs regulations, when shipping goods abroad.
  • Documents proving delivery to the foreign importer.
  • Packing list, bill of lading, and goods insurance documents (if applicable).

For goods exported and stored in bonded warehouses abroad: The exporting entity must provide documentation proving the sale of goods outside Vietnam, such as:

  • Export sales contract; entrusted export contract.
  • Sales invoice for the exported goods.
  • Non-cash payment documentation as required by law; customs declaration that has completed customs procedures in accordance with legal regulations when shipping goods abroad.
  • Documents proving delivery to the foreign importer (customs declaration completed when exporting goods to the buyer’s country or documentation proving goods have been sold in a bonded warehouse abroad).
  • Packing list, bill of lading, and goods insurance documents (if applicable).

For goods sold in restricted areas to individuals (foreigners or Vietnamese nationals) who have completed exit procedures; goods sold in duty-free stores:

  • The business entity must have documentation proving the sale of goods in restricted areas or duty-free stores.
  • The business entity must present a sales inventory list of goods sold to customers in restricted areas or duty-free stores, following the template in Appendix III issued along with this decree.

For digital content products provided to foreign entities: The service provider must have records and documents proving that the service was consumed outside Vietnam, such as:

  • Non-cash payment documentation as required by law.
  • Information on the residency status of the foreign entity (organization or individual) abroad, such as billing address, shipping address, headquarters address, home address, or similar details provided by the purchaser to the supplier in Vietnam.
  • Access information of the foreign organization or individual, including details such as national phone area code of the SIM card, IP address, landline location, or other similar information related to the purchaser.

3/ New Guidelines on Entities Exempt from VAT

3.1. Detailed Regulations on Agricultural Products undergoing only basic processing that are exempt from VAT

  • Additional basic processing methods include: milling, breaking into pieces, grinding into fragments, polishing seeds, coating seeds, separating into parts, deboning, chopping, peeling, crushing, flattening, and airtight canning.
  • Expanded responsibilities of the Ministry of Agriculture and Environment in determining unprocessed or minimally processed products.
  • In cases where determination is unclear, the Ministry of Agriculture and Environment is responsible for assessing the production process of cultivated plants, plantation forests, livestock, farmed seafood, and harvested aquatic products to conclude whether they remain unprocessed or have undergone only basic processing. This applies to self-produced and harvested goods sold domestically as well as imported goods, in accordance with legal regulations.

3.2. New Issuance of Lists of VAT-Exempt Items

The newly issued lists of VAT-exempt items in Appendices I and II of the draft decree include:

  • List of exported products that are natural resources and extracted minerals that have not been processed into other products.
  • List of exported products that are natural resources and extracted minerals that have been processed into other products.

4/ New Guidelines on Taxable Price Calculation

The draft Decree guiding the implementation of the Value-Added Tax Law, which details the execution of certain provisions of the VAT Law, has introduced notable guidelines on taxable price calculation for goods and services used for promotional purposes, as follows:

  • Selling goods or providing services accompanied by competition entry tickets for customers, where winners are selected based on published rules and prizes (or other equivalent competition and prize distribution methods): The taxable price of the goods and services does not include the value of the winning goods or services awarded through the competition entry ticket (if applicable).
  • When participation in a lottery-style program is directly tied to the purchase of goods or services, and winners are determined by chance based on the announced rules and prizes: The taxable price of the goods or services does not include the value of the goods or services used as prizes.
  • For loyalty programs, where rewards are granted based on the quantity or value of goods and services purchased by customers, and are recorded in the form of customer cards or purchase tracking vouchers: The taxable price does not include the value of customer cards or purchase tracking vouchers.

5/ Tax Refund Guidelines for Goods and Services Subject to the 5% VAT Rate

The draft Decree guiding the implementation of the VAT Law introduces new guidelines for businesses that solely produce goods or provide services subject to the 5% VAT rate, specifically as follows

a. Businesses that solely produce goods or provide services subject to the 5% VAT rate will be eligible for a VAT refund if their uncredited input VAT reaches at least 300 million VND after 12 consecutive months or 4 consecutive quarters.

b. If a business produces goods or provides services subject to multiple VAT rates, it must separately account for the input VAT used for the production of goods or provision of services that are subject to the 5% VAT rate.

c. If separate accounting is not possible, the input VAT used for producing goods or providing services subject to the 5% VAT rate will be determined based on an allocation ratio between the revenue from taxable goods and services subject to the 5% VAT rate and the total revenue from all taxable goods and services during the tax refund period.

d. The input VAT for the production of goods or provision of services subject to the 5% VAT rate (including VAT separately accounted for and VAT determined by the allocation ratio) will be eligible for a tax refund if, after offsetting against the VAT payable on taxable goods and services (if any), the remaining balance is at least 300 million VND. In this case, the business will be granted a VAT refund for activities related to producing goods or providing services subject to the 5% VAT rate.

e. The VAT refund amount for the production of goods or provision of services subject to the 5% VAT rate will be determined in accordance with the regulations outlined in Appendix V issued along with the draft decree.