Vietnam Issues Circular 219 on VAT

Posted by Reading Time: 3 minutes

HANOI – The Vietnamese government has recently released Circular 219 and contains guidance on the implementation of the new VAT Decree 209. The Circular is effective retroactively from January 1, 2014, and is a replacement for Circular 06/2012.

Key changes brought about by Circular 219

With regards to zero rate exported services, the Circular has removed the “permanent establishment” (PE) condition from the regulations.  The PE condition stated that in order to qualify for zero rate exported services, the overseas customer could not have a permanent establishment in Vietnam.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ International Tax Planning Services

The PE condition has been replaced by the condition that the exported services must be consumed inside non-tariff zones or outside of Vietnam.  A potential area for trouble in this new condition is the fact that the term “consumed outside of Vietnam” is not clearly defined by the Vietnamese government.  As such, it may be difficult to realize a zero percent rate in practice.

RELATED: A Guide to Understanding Vietnam’s VAT

Additionally, if support is given for marketing, promotional, or display activities, then the distributers are required to issue a VAT invoice with a VAT rate of 10 percent.

Furthermore, in the case of making input VAT creditable, the Circular has stressed the importance of sellers and buyers using bank accounts which have been notified to the tax authorities for making payments.

Finally, if an Export Processing Enterprise has been granted a trading license, then it is required to set up a branch outside of the Export Processing Zone in order to carry out any of its trading activities.  The branch must also file separate VAT returns.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email vietnam@dezshira.com, visit www.dezshira.com, or download the company brochure.

You can stay up to date with the latest business and investment trends across Vietnam by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

Related Reading

vb cover 1st effort

A Guide to Understanding Vietnam’s VAT
In this issue of Vietnam Briefing, we clarify the entire VAT process by taking you through an introduction as to what VAT is, who and what is liable, and how to pay it properly. We first take you through the basics of VAT in Vietnam before taking you deeper into the topic. Additionally, we provide updates on the new changes to the VAT process and explain how they will impact your business. The magazine is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore until the end of April.

Vietnam’s VAT Law for the Financial Category

Vietnam’s VAT Law for Machinery and Equipment

Vietnam’s VAT Law for Media

Vietnam’s VAT Law for Gifts

Vietnam’s VAT Law for the Financial Category

Vietnam’s VAT Law for Housing

Vietnam’s VAT Law for Healthcare

Vietnam’s VAT Law for Imports/Exports

Commercial Housing Receives VAT Incentive

Calculating Value-added Tax in Vietnam

Vietnam Issues New VAT Regulations

Valued-added Tax in Vietnam: Filing, Payment and Refund

Leave a Reply

Your email address will not be published. Required fields are marked *