Vietnam’s VAT Law for Imports/Exports
HANOI – Vietnam’s VAT law touches on a number of goods and services. Please see our latest magazine on the country’s VAT law, entitled A Guide to Understanding Vietnam’s VAT, in order to receive a general overview of what VAT is and how to properly ensure that you follow all regulations involved.
In this article, we examine the VAT implications for a number of goods and services listed under the Import/Export category in Vietnam’s VAT law.
There have been a number of updates to Vietnam’s VAT law with relation to the category of Import/Export. The recent Law on Amendment of Law on VAT 2013 addresses new points of non-taxable subjects, taxable prices, tax rates, tax calculation methods, tax credits and refunds. The Law, which took effect on January 1st 2014:
- Defines exported goods and services which receive a tax rate of 0% as goods and services used abroad and in non-tariff areas, goods and services supplied to foreign customers under the Government’s regulations.
Transactions related to certain products and services are viewed as non-taxable transactions, these include:
- Goods transferred out of border gate or transited via Vietnamese territory; Goods temporarily imported for re-export; goods temporarily exported for re-import; raw materials imported for the production or processing of goods for export under contracts signed with foreign parties; goods and services traded between foreign countries and non-tariff areas and between non-tariff areas;
- Technology transfer; transfer of intellectual property rights; computer software;
- Gold imported in the form of bars or ingots which have not yet been processed into fine-art articles, jewelries or other products;
- Exported products which are mined resources or minerals and have not been processed into other products.
The chargeable amount of taxable price includes the following terms:
- For imported goods eligible for exemption from or reduction of import duty, the taxed price is the import price plus (+) the payable import duty determined at the applicable duty rate after subtracting the exempted or reduced amount.
The Import/Export category has exposure to more than one tax category depending on what the good or service is. See below for further clarification.
0% Tax Rate
Applies to exported goods and services; work construction and installation for export processing enterprises; international transportation; goods and services not liable to VAT upon exportation comprising:
Exported goods include:
- Goods exported abroad;
- Goods sold into non-tariff zones; goods sold to duty-free shops.
Cases regarded as export under law:
- Intermediary processed goods under the commercial law regarding international goods trading and goods trading and processing agency with foreign parties;
- On-spot exports;
- goods exported for sale at overseas fairs and exhibitions.
Exported services include:
- services provided directly to overseas organizations, individuals and organizations or individuals in non-tariff zones.
– Overseas organizations are foreign organizations without permanent establishments in Vietnam and are not VAT payers in Vietnam;
– Overseas individuals are non-resident foreigners and overseas Vietnamese not present in Vietnam during the provision of services;
– Organizations and individuals in non-tariff zones are those with business registration certificates and other cases specified by the Prime Minister.
- International transportation covers:
– transportation of passengers, luggage and cargo on international routes from Vietnam to overseas or vice versa or from an overseas place to another, regardless of having means of transport or not. In case a contract on international transportation covers domestic routes, international transportation also covers such domestic routes;
– Aviation and maritime services provided directly to overseas organizations or through agents.
- Other goods and services:
– Work construction and installation for export processing enterprises;
– Goods and services not liable to VAT upon exportation, except cases ineligible for the 0% tax rate provided below;
– Repair of aircraft and seagoing ships for foreign organizations and individuals.
There are a number of conditions relating to the application of the 0% tax rate for export related goods:
For exported goods:
- Having a contract on sale or processing of exported goods; or contract on entrusted export;
- Having vouchers of via-bank payment for exported goods and other documents under law;
- Having customs declarations.
For exported services:
- Having a contract on service provision with an overseas organization or individual, or an organization or individual in a non-tariff zone;
- Having documents of via-bank payment for exported services and other documents under law;
- Having a commitment from the overseas organization that it neither has a permanent establishment in Vietnam nor is a VAT payer in Vietnam; a commitment of the overseas person that it is a non-resident foreigner or overseas Vietnamese and stays outside Vietnam during the service provision.
For international transportation:
- Having a lawful contract on carriage of passengers, luggage and cargo between the carrier and carriage lessee along international routes from Vietnam to abroad or vice;
- Having documents on via-bank payment or other modes of payment regarded as via-bank payment. Having documents on direct payment for carriage of individual passenger.
For aviation and maritime services:
Applies to aviation services at international airports and airfields and international air cargo terminals which satisfy the following conditions:
- Having a service provision contract with or a service provision request by, an overseas organization or a foreign airline;
- Having documents on via-bank payment or other modes of payment regarded as via-bank payment.
Applies to maritime services at seaports which satisfy the following conditions:
- Having a service provision contract with, or a service provision request by, an overseas organization or a shipping agent;
- Having vouchers of via-bank payment of an overseas organization or a shipping agent, or other modes of payment regarded as via-bank payment.
Certain types of Transfer and Import/Export activities are ineligible for the 0 percent tax rate, these include:
- Offshore transfer of technologies or intellectual property rights;
- Export products being unprocessed natural resources or minerals goods and services provided to individuals without business registration in non-tariff zones.
Cases ineligible for the 0% tax rate are subject to the corresponding tax rates applicable to goods and services sold or provided domestically.
10% standard tax rate
This tax rate applies to all goods and services not otherwise specified. The VAT rates previously specified apply uniformly to each type of good or service at the stages of importation, manufacture, processing and trading.
A variety of goods and service transactions may qualify to be exempted from VAT. It is best to contact a tax professional to ensure that all regulations are followed.
Special Regimes or Arrangements
Refunds to non-registered overseas traders:
- Imported goods which are refunded to overseas traders can be claimed for import VAT and import duties refund in proportion with actual re-exported goods;
- If the company registers the temporary import and re-export declaration, imported goods shall not be subject to VAT;
- If the company registers the business declaration, imported goods shall be subject to VAT, time-limit to fulfill import VAT is 30 days from the date of registering customs’ declaration. The company will not have to pay import VAT if goods are re-exported within the time-limit of 30 days. In case that the company has already paid import VAT, the company can directly contact tax authorities to claim for the paid import VAT.
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In this issue of Vietnam Briefing, entitled A Guide to Understanding Vietnam’s VAT, we attempt to 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.
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